Correlation Between Citigroup and Catalyst Metals

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

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

Diversification Opportunities for Citigroup and Catalyst Metals

0.6

Correlation Coefficient

Citigroup  Catalyst Metals

Poor diversification

The 3 months correlation between Citigroup and Catalyst is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals 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 Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Citigroup i.e., Citigroup and Catalyst Metals go up and down completely randomly.

Pair Corralation between Citigroup and Catalyst Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.18 times less return on investment than Catalyst Metals. But when comparing it to its historical volatility, Citigroup is 2.87 times less risky than Catalyst Metals. It trades about 0.08 of its potential returns per unit of risk. Catalyst Metals is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Catalyst Metals on December 4, 2024 and sell it today you would earn a total of  327.00  from holding Catalyst Metals or generate 327.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Citigroup  vs.  Catalyst Metals

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

Catalyst Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Catalyst Metals

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

The idea behind Citigroup and Catalyst Metals 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.