Correlation Between Citigroup and Arcosa

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

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

Diversification Opportunities for Citigroup and Arcosa

0.96

Correlation Coefficient

Citigroup  Arcosa

Almost no diversification

The 3 months correlation between Citigroup and Arcosa is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arcosa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcosa Inc 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 Arcosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcosa Inc has no effect on the direction of Citigroup i.e., Citigroup and Arcosa go up and down completely randomly.

Pair Corralation between Citigroup and Arcosa

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.29 times less return on investment than Arcosa. But when comparing it to its historical volatility, Citigroup is 1.26 times less risky than Arcosa. It trades about 0.07 of its potential returns per unit of risk. Arcosa Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,070  in Arcosa Inc on September 24, 2024 and sell it today you would earn a total of  4,430  from holding Arcosa Inc or generate 87.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.22%
Values	Daily Returns

Citigroup  vs.  Arcosa Inc

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

Arcosa Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arcosa Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arcosa reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Arcosa

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

The idea behind Citigroup and Arcosa Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.