Correlation Between Citigroup and Denali Capital

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

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

Diversification Opportunities for Citigroup and Denali Capital

0.45

Correlation Coefficient

Citigroup  Denali Capital

Very weak diversification

The 3 months correlation between Citigroup and Denali is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Denali Capital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denali Capital Acqui 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 Denali Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denali Capital Acqui has no effect on the direction of Citigroup i.e., Citigroup and Denali Capital go up and down completely randomly.

Pair Corralation between Citigroup and Denali Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.75 times less return on investment than Denali Capital. But when comparing it to its historical volatility, Citigroup is 6.61 times less risky than Denali Capital. It trades about 0.4 of its potential returns per unit of risk. Denali Capital Acquisition is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4.20  in Denali Capital Acquisition on October 22, 2024 and sell it today you would earn a total of  0.63  from holding Denali Capital Acquisition or generate 15.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.63%
Values	Daily Returns

Citigroup  vs.  Denali Capital Acquisition

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) 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.

Denali Capital Acqui

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Denali Capital Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Denali Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Denali Capital

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

The idea behind Citigroup and Denali Capital Acquisition 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.