Correlation Between Citigroup and Arkadia Digital

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

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

Diversification Opportunities for Citigroup and Arkadia Digital

0.34

Correlation Coefficient

Citigroup  Arkadia Digital

Weak diversification

The 3 months correlation between Citigroup and Arkadia is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arkadia Digital Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkadia Digital Media 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 Arkadia Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkadia Digital Media has no effect on the direction of Citigroup i.e., Citigroup and Arkadia Digital go up and down completely randomly.

Pair Corralation between Citigroup and Arkadia Digital

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.92 times less return on investment than Arkadia Digital. But when comparing it to its historical volatility, Citigroup is 2.3 times less risky than Arkadia Digital. It trades about 0.03 of its potential returns per unit of risk. Arkadia Digital Media is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Arkadia Digital Media on December 4, 2024 and sell it today you would earn a total of  300.00  from holding Arkadia Digital Media or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  Arkadia Digital Media

Citigroup

Risk-Adjusted Performance

OK

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.

Arkadia Digital Media

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arkadia Digital Media are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Arkadia Digital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Arkadia Digital

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

The idea behind Citigroup and Arkadia Digital Media 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.