Correlation Between Citigroup and Eaco Corp

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

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

Diversification Opportunities for Citigroup and Eaco Corp

-0.24

Correlation Coefficient

Citigroup  Eaco Corp

Very good diversification

The 3 months correlation between Citigroup and Eaco is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Eaco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaco Corp 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 Eaco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaco Corp has no effect on the direction of Citigroup i.e., Citigroup and Eaco Corp go up and down completely randomly.

Pair Corralation between Citigroup and Eaco Corp

If you would invest  6,092  in Citigroup on September 2, 2024 and sell it today you would earn a total of  995.00  from holding Citigroup or generate 16.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Citigroup  vs.  Eaco Corp

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Eaco Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaco Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Eaco Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Eaco Corp

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

The idea behind Citigroup and Eaco Corp 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 Stocks Directory module to find actively traded stocks across global markets.