Correlation Between Citigroup and Federated Government

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

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

Diversification Opportunities for Citigroup and Federated Government

0.84

Correlation Coefficient

Citigroup  Federated Government

Very poor diversification

The 3 months correlation between Citigroup and Federated is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Federated Government Ultrashor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Government 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 Federated Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Government has no effect on the direction of Citigroup i.e., Citigroup and Federated Government go up and down completely randomly.

Pair Corralation between Citigroup and Federated Government

Taking into account the 90-day investment horizon Citigroup is expected to generate 18.46 times more return on investment than Federated Government. However, Citigroup is 18.46 times more volatile than Federated Government Ultrashort. It trades about 0.41 of its potential returns per unit of risk. Federated Government Ultrashort is currently generating about 0.22 per unit of risk. If you would invest  6,977  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

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

Citigroup  vs.  Federated Government Ultrashor

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Federated Government

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Government Ultrashort are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Federated Government

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

The idea behind Citigroup and Federated Government Ultrashort 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.