Correlation Between Citigroup and Crown Holdings

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

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

Diversification Opportunities for Citigroup and Crown Holdings

-0.02

Correlation Coefficient

Citigroup  Crown Holdings

Good diversification

The 3 months correlation between Citigroup and Crown is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Crown Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown Holdings 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 Crown Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown Holdings has no effect on the direction of Citigroup i.e., Citigroup and Crown Holdings go up and down completely randomly.

Pair Corralation between Citigroup and Crown Holdings

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.18 times more return on investment than Crown Holdings. However, Citigroup is 1.18 times more volatile than Crown Holdings. It trades about -0.03 of its potential returns per unit of risk. Crown Holdings is currently generating about -0.41 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 Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Crown Holdings

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 uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crown Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Crown Holdings

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

The idea behind Citigroup and Crown Holdings 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.