Correlation Between Citigroup and EMC Public

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

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

Diversification Opportunities for Citigroup and EMC Public

-0.38

Correlation Coefficient

Citigroup  EMC Public

Very good diversification

The 3 months correlation between Citigroup and EMC is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and EMC Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMC Public 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 EMC Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMC Public has no effect on the direction of Citigroup i.e., Citigroup and EMC Public go up and down completely randomly.

Pair Corralation between Citigroup and EMC Public

Taking into account the 90-day investment horizon Citigroup is expected to generate 20.1 times less return on investment than EMC Public. But when comparing it to its historical volatility, Citigroup is 28.48 times less risky than EMC Public. It trades about 0.06 of its potential returns per unit of risk. EMC Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  15.00  in EMC Public on October 7, 2024 and sell it today you would lose (7.00) from holding EMC Public or give up 46.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.98%
Values	Daily Returns

Citigroup  vs.  EMC Public

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

EMC Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EMC Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, EMC Public disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and EMC Public

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

The idea behind Citigroup and EMC Public 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.