Correlation Between Citigroup and Core Lithium

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

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

Diversification Opportunities for Citigroup and Core Lithium

-0.56

Correlation Coefficient

Citigroup  Core Lithium

Excellent diversification

The 3 months correlation between Citigroup and Core is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Core Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Lithium 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 Core Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Lithium has no effect on the direction of Citigroup i.e., Citigroup and Core Lithium go up and down completely randomly.

Pair Corralation between Citigroup and Core Lithium

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.31 times more return on investment than Core Lithium. However, Citigroup is 3.19 times less risky than Core Lithium. It trades about 0.08 of its potential returns per unit of risk. Core Lithium is currently generating about -0.07 per unit of risk. If you would invest  4,112  in Citigroup on September 18, 2024 and sell it today you would earn a total of  3,037  from holding Citigroup or generate 73.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.0%
Values	Daily Returns

Citigroup  vs.  Core Lithium

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Core Lithium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Lithium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Citigroup and Core Lithium

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

The idea behind Citigroup and Core Lithium 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.