Correlation Between Citigroup and CopperCorp Resources

Can any of the company-specific risk be diversified away by investing in both Citigroup and CopperCorp Resources 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 CopperCorp Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and CopperCorp Resources, you can compare the effects of market volatilities on Citigroup and CopperCorp Resources 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 CopperCorp Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and CopperCorp Resources.

Diversification Opportunities for Citigroup and CopperCorp Resources

0.84

Correlation Coefficient

Citigroup  CopperCorp Resources

Very poor diversification

The 3 months correlation between Citigroup and CopperCorp is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CopperCorp Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CopperCorp Resources 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 CopperCorp Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CopperCorp Resources has no effect on the direction of Citigroup i.e., Citigroup and CopperCorp Resources go up and down completely randomly.

Pair Corralation between Citigroup and CopperCorp Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 9.33 times less return on investment than CopperCorp Resources. But when comparing it to its historical volatility, Citigroup is 12.4 times less risky than CopperCorp Resources. It trades about 0.1 of its potential returns per unit of risk. CopperCorp Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8.00  in CopperCorp Resources on September 20, 2024 and sell it today you would earn a total of  7.00  from holding CopperCorp Resources or generate 87.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  CopperCorp Resources

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

CopperCorp Resources

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CopperCorp Resources are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CopperCorp Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and CopperCorp Resources

The main advantage of trading using opposite Citigroup and CopperCorp Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, CopperCorp Resources 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 CopperCorp Resources will offset losses from the drop in CopperCorp Resources' long position.

The idea behind Citigroup and CopperCorp Resources 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.