Correlation Between Citigroup and First Industrial

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

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

Diversification Opportunities for Citigroup and First Industrial

-0.16

Correlation Coefficient

Citigroup  First Industrial

Good diversification

The 3 months correlation between Citigroup and First is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and First Industrial Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Industrial Realty 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 First Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Industrial Realty has no effect on the direction of Citigroup i.e., Citigroup and First Industrial go up and down completely randomly.

Pair Corralation between Citigroup and First Industrial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.53 times more return on investment than First Industrial. However, Citigroup is 1.53 times more volatile than First Industrial Realty. It trades about 0.16 of its potential returns per unit of risk. First Industrial Realty is currently generating about -0.08 per unit of risk. If you would invest  6,209  in Citigroup on October 15, 2024 and sell it today you would earn a total of  1,068  from holding Citigroup or generate 17.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  First Industrial Realty

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

First Industrial Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Industrial Realty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and First Industrial

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

The idea behind Citigroup and First Industrial Realty 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.