Correlation Between Citigroup and Herzfeld Caribbean

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

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

Diversification Opportunities for Citigroup and Herzfeld Caribbean

0.46

Correlation Coefficient

Citigroup  Herzfeld Caribbean

Very weak diversification

The 3 months correlation between Citigroup and Herzfeld is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Herzfeld Caribbean Basin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herzfeld Caribbean Basin 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 Herzfeld Caribbean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herzfeld Caribbean Basin has no effect on the direction of Citigroup i.e., Citigroup and Herzfeld Caribbean go up and down completely randomly.

Pair Corralation between Citigroup and Herzfeld Caribbean

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Herzfeld Caribbean. In addition to that, Citigroup is 1.08 times more volatile than Herzfeld Caribbean Basin. It trades about -0.2 of its total potential returns per unit of risk. Herzfeld Caribbean Basin is currently generating about 0.05 per unit of volatility. If you would invest  246.00  in Herzfeld Caribbean Basin on December 5, 2024 and sell it today you would earn a total of  4.00  from holding Herzfeld Caribbean Basin or generate 1.63% return on investment over 90 days.

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

Citigroup  vs.  Herzfeld Caribbean Basin

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Herzfeld Caribbean Basin

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Herzfeld Caribbean Basin are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unsteady fundamental drivers, Herzfeld Caribbean sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Herzfeld Caribbean

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

The idea behind Citigroup and Herzfeld Caribbean Basin 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.