Correlation Between Citigroup and Convex Finance

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

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

Diversification Opportunities for Citigroup and Convex Finance

0.68

Correlation Coefficient

Citigroup  Convex Finance

Poor diversification

The 3 months correlation between Citigroup and Convex is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Convex Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Convex Finance 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 Convex Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Convex Finance has no effect on the direction of Citigroup i.e., Citigroup and Convex Finance go up and down completely randomly.

Pair Corralation between Citigroup and Convex Finance

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.66 times less return on investment than Convex Finance. But when comparing it to its historical volatility, Citigroup is 5.38 times less risky than Convex Finance. It trades about 0.2 of its potential returns per unit of risk. Convex Finance is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Convex Finance on September 13, 2024 and sell it today you would earn a total of  419.00  from holding Convex Finance or generate 197.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Convex Finance

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Convex Finance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Convex Finance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Convex Finance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Convex Finance

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

The idea behind Citigroup and Convex Finance 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.