Correlation Between Citigroup and First Capital

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

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

Diversification Opportunities for Citigroup and First Capital

-0.24

Correlation Coefficient

Citigroup  First Capital

Very good diversification

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

Pair Corralation between Citigroup and First Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.85 times less return on investment than First Capital. In addition to that, Citigroup is 1.18 times more volatile than First Capital. It trades about 0.03 of its total potential returns per unit of risk. First Capital is currently generating about 0.19 per unit of volatility. If you would invest  3,176  in First Capital on December 28, 2024 and sell it today you would earn a total of  634.00  from holding First Capital or generate 19.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  First Capital

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and First Capital

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

The idea behind Citigroup and First Capital 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.