Correlation Between Citigroup and Fairchem Organics

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

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

Diversification Opportunities for Citigroup and Fairchem Organics

-0.81

Correlation Coefficient

Citigroup  Fairchem Organics

Pay attention - limited upside

The 3 months correlation between Citigroup and Fairchem is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fairchem Organics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fairchem Organics 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 Fairchem Organics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fairchem Organics has no effect on the direction of Citigroup i.e., Citigroup and Fairchem Organics go up and down completely randomly.

Pair Corralation between Citigroup and Fairchem Organics

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.4 times more return on investment than Fairchem Organics. However, Citigroup is 2.52 times less risky than Fairchem Organics. It trades about 0.1 of its potential returns per unit of risk. Fairchem Organics Limited is currently generating about 0.0 per unit of risk. If you would invest  6,159  in Citigroup on September 20, 2024 and sell it today you would earn a total of  683.00  from holding Citigroup or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Citigroup  vs.  Fairchem Organics Limited

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fairchem Organics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fairchem Organics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Fairchem Organics is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Fairchem Organics

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

The idea behind Citigroup and Fairchem Organics Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.