Correlation Between Citigroup and Dream Residential

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

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

Diversification Opportunities for Citigroup and Dream Residential

-0.3

Correlation Coefficient

Citigroup  Dream Residential

Very good diversification

The 3 months correlation between Citigroup and Dream is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dream Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Residential Real 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 Dream Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Residential Real has no effect on the direction of Citigroup i.e., Citigroup and Dream Residential go up and down completely randomly.

Pair Corralation between Citigroup and Dream Residential

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.03 times less return on investment than Dream Residential. But when comparing it to its historical volatility, Citigroup is 1.59 times less risky than Dream Residential. It trades about 0.05 of its potential returns per unit of risk. Dream Residential Real is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Dream Residential Real on December 20, 2024 and sell it today you would earn a total of  240.00  from holding Dream Residential Real or generate 36.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  Dream Residential Real

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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.

Dream Residential Real

Risk-Adjusted Performance

Solid

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

Pair Trading with Citigroup and Dream Residential

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

The idea behind Citigroup and Dream Residential Real 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.