Correlation Between Citigroup and Dreyfus Yield

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

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

Diversification Opportunities for Citigroup and Dreyfus Yield

0.57

Correlation Coefficient

Citigroup  Dreyfus Yield

Very weak diversification

The 3 months correlation between Citigroup and Dreyfus is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dreyfus Yield Enhancement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Yield Enhancement 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 Dreyfus Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Yield Enhancement has no effect on the direction of Citigroup i.e., Citigroup and Dreyfus Yield go up and down completely randomly.

Pair Corralation between Citigroup and Dreyfus Yield

Taking into account the 90-day investment horizon Citigroup is expected to generate 14.45 times more return on investment than Dreyfus Yield. However, Citigroup is 14.45 times more volatile than Dreyfus Yield Enhancement. It trades about 0.41 of its potential returns per unit of risk. Dreyfus Yield Enhancement is currently generating about 0.11 per unit of risk. If you would invest  6,977  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Dreyfus Yield Enhancement

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Dreyfus Yield Enhancement

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dreyfus Yield Enhancement are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Dreyfus Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Dreyfus Yield

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

The idea behind Citigroup and Dreyfus Yield Enhancement 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.