Correlation Between Citigroup and FedEx Corp

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

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

Diversification Opportunities for Citigroup and FedEx Corp

0.61

Correlation Coefficient

Citigroup  FedEx Corp

Poor diversification

The 3 months correlation between Citigroup and FedEx is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and FedEx Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx Corp 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 FedEx Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx Corp has no effect on the direction of Citigroup i.e., Citigroup and FedEx Corp go up and down completely randomly.

Pair Corralation between Citigroup and FedEx Corp

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.85 times more return on investment than FedEx Corp. However, Citigroup is 1.17 times less risky than FedEx Corp. It trades about 0.07 of its potential returns per unit of risk. FedEx Corp is currently generating about 0.05 per unit of risk. If you would invest  4,812  in Citigroup on October 24, 2024 and sell it today you would earn a total of  3,391  from holding Citigroup or generate 70.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.6%
Values	Daily Returns

Citigroup  vs.  FedEx Corp

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.

FedEx Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FedEx Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, FedEx Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and FedEx Corp

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

The idea behind Citigroup and FedEx Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.