Correlation Between Citigroup and Copart

Can any of the company-specific risk be diversified away by investing in both Citigroup and Copart at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Copart into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Copart Inc, you can compare the effects of market volatilities on Citigroup and Copart and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Copart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Copart.

Diversification Opportunities for Citigroup and Copart

0.93

Correlation Coefficient

Citigroup  Copart

Almost no diversification

The 3 months correlation between Citigroup and Copart is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Copart Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copart Inc and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Copart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copart Inc has no effect on the direction of Citigroup i.e., Citigroup and Copart go up and down completely randomly.

Pair Corralation between Citigroup and Copart

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.94 times more return on investment than Copart. However, Citigroup is 1.06 times less risky than Copart. It trades about -0.03 of its potential returns per unit of risk. Copart Inc is currently generating about -0.18 per unit of risk. If you would invest  6,984  in Citigroup on September 23, 2024 and sell it today you would lose (65.00) from holding Citigroup or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Copart Inc

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Copart Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copart Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Copart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Copart

The main advantage of trading using opposite Citigroup and Copart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Copart can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Copart will offset losses from the drop in Copart's long position.

The idea behind Citigroup and Copart Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.