Correlation Between Citigroup and Two Roads

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

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

Diversification Opportunities for Citigroup and Two Roads

-0.37

Correlation Coefficient

Citigroup  Two Roads

Very good diversification

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

Pair Corralation between Citigroup and Two Roads

Taking into account the 90-day investment horizon Citigroup is expected to generate 12.9 times more return on investment than Two Roads. However, Citigroup is 12.9 times more volatile than Two Roads Shared. It trades about 0.11 of its potential returns per unit of risk. Two Roads Shared is currently generating about 0.04 per unit of risk. If you would invest  6,209  in Citigroup on August 30, 2024 and sell it today you would earn a total of  807.00  from holding Citigroup or generate 13.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Two Roads Shared

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Two Roads Shared

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Two Roads Shared are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Two Roads is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Two Roads

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

The idea behind Citigroup and Two Roads Shared 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.