Correlation Between Citigroup and Family Dollar

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

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

Diversification Opportunities for Citigroup and Family Dollar

0.0

Correlation Coefficient

Citigroup  Family Dollar

Pay attention - limited upside

The 3 months correlation between Citigroup and Family is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Family Dollar Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Family Dollar Stores 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 Family Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Family Dollar Stores has no effect on the direction of Citigroup i.e., Citigroup and Family Dollar go up and down completely randomly.

Pair Corralation between Citigroup and Family Dollar

If you would invest  7,135  in Citigroup on October 27, 2024 and sell it today you would earn a total of  1,013  from holding Citigroup or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Citigroup  vs.  Family Dollar Stores

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Family Dollar Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Family Dollar Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Family Dollar is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Family Dollar

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

The idea behind Citigroup and Family Dollar Stores 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.