Correlation Between Citigroup and Deere

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

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

Diversification Opportunities for Citigroup and Deere

0.82

Correlation Coefficient

Citigroup  Deere

Very poor diversification

The 3 months correlation between Citigroup and Deere is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of Citigroup i.e., Citigroup and Deere go up and down completely randomly.

Pair Corralation between Citigroup and Deere

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.08 times more return on investment than Deere. However, Citigroup is 1.08 times more volatile than Deere Company. It trades about 0.19 of its potential returns per unit of risk. Deere Company is currently generating about 0.18 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,427  from holding Citigroup or generate 24.97% return on investment over 90 days.

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

Citigroup  vs.  Deere Company

Citigroup

Risk-Adjusted Performance

15 of 100

Good

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.

Deere Company

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deere Company are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deere reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Deere

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

The idea behind Citigroup and Deere Company 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..