Correlation Between Citigroup and Destinations Equity

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Destinations Equity 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 Destinations Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Destinations Equity Income, you can compare the effects of market volatilities on Citigroup and Destinations Equity 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 Destinations Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Destinations Equity.

Diversification Opportunities for Citigroup and Destinations Equity

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Citigroup and Destinations is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Destinations Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Equity 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 Destinations Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Equity has no effect on the direction of Citigroup i.e., Citigroup and Destinations Equity go up and down completely randomly.

Pair Corralation between Citigroup and Destinations Equity

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.86 times more return on investment than Destinations Equity. However, Citigroup is 1.86 times more volatile than Destinations Equity Income. It trades about -0.09 of its potential returns per unit of risk. Destinations Equity Income is currently generating about -0.35 per unit of risk. If you would invest  7,075  in Citigroup on September 24, 2024 and sell it today you would lose (156.00) from holding Citigroup or give up 2.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Destinations Equity Income

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Destinations Equity 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Destinations Equity Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Destinations Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citigroup and Destinations Equity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Destinations Equity

The main advantage of trading using opposite Citigroup and Destinations Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Destinations Equity 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 Destinations Equity will offset losses from the drop in Destinations Equity's long position.
The idea behind Citigroup and Destinations Equity Income 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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