Correlation Between Citigroup and Fidelity Quality

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

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

Diversification Opportunities for Citigroup and Fidelity Quality

0.93

Correlation Coefficient

Citigroup  Fidelity Quality

Almost no diversification

The 3 months correlation between Citigroup and Fidelity is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fidelity Quality Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Quality Factor 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 Fidelity Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Quality Factor has no effect on the direction of Citigroup i.e., Citigroup and Fidelity Quality go up and down completely randomly.

Pair Corralation between Citigroup and Fidelity Quality

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Fidelity Quality. In addition to that, Citigroup is 1.6 times more volatile than Fidelity Quality Factor. It trades about -0.04 of its total potential returns per unit of risk. Fidelity Quality Factor is currently generating about -0.02 per unit of volatility. If you would invest  6,599  in Fidelity Quality Factor on September 19, 2024 and sell it today you would lose (30.00) from holding Fidelity Quality Factor or give up 0.45% of portfolio value over 90 days.

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

Citigroup  vs.  Fidelity Quality Factor

Citigroup

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) 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.

Fidelity Quality Factor

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Quality Factor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fidelity Quality is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Fidelity Quality

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

The idea behind Citigroup and Fidelity Quality Factor 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.