Correlation Between Citigroup and Deep Value

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

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

Diversification Opportunities for Citigroup and Deep Value

-0.86

Correlation Coefficient

Citigroup  Deep Value

Pay attention - limited upside

The 3 months correlation between Citigroup and Deep is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Deep Value Driller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deep Value Driller 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 Deep Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deep Value Driller has no effect on the direction of Citigroup i.e., Citigroup and Deep Value go up and down completely randomly.

Pair Corralation between Citigroup and Deep Value

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.74 times more return on investment than Deep Value. However, Citigroup is 1.35 times less risky than Deep Value. It trades about 0.06 of its potential returns per unit of risk. Deep Value Driller is currently generating about 0.04 per unit of risk. If you would invest  4,708  in Citigroup on October 11, 2024 and sell it today you would earn a total of  2,618  from holding Citigroup or generate 55.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.4%
Values	Daily Returns

Citigroup  vs.  Deep Value Driller

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Deep Value Driller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deep Value Driller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Citigroup and Deep Value

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

The idea behind Citigroup and Deep Value Driller 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.