Correlation Between Citigroup and Crescent Steel

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

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

Diversification Opportunities for Citigroup and Crescent Steel

-0.5

Correlation Coefficient

Citigroup  Crescent Steel

Very good diversification

The 3 months correlation between Citigroup and Crescent is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Crescent Steel Allied in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crescent Steel Allied 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 Crescent Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crescent Steel Allied has no effect on the direction of Citigroup i.e., Citigroup and Crescent Steel go up and down completely randomly.

Pair Corralation between Citigroup and Crescent Steel

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.42 times more return on investment than Crescent Steel. However, Citigroup is 2.36 times less risky than Crescent Steel. It trades about 0.25 of its potential returns per unit of risk. Crescent Steel Allied is currently generating about -0.03 per unit of risk. If you would invest  6,255  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,912  from holding Citigroup or generate 30.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  Crescent Steel Allied

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Crescent Steel Allied

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crescent Steel Allied has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and Crescent Steel

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

The idea behind Citigroup and Crescent Steel Allied 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.