Correlation Between Citigroup and Five Star

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

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

Diversification Opportunities for Citigroup and Five Star

0.57

Correlation Coefficient

Citigroup  Five Star

Very weak diversification

The 3 months correlation between Citigroup and Five is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp 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 Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of Citigroup i.e., Citigroup and Five Star go up and down completely randomly.

Pair Corralation between Citigroup and Five Star

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times more return on investment than Five Star. However, Citigroup is 1.36 times more volatile than Five Star Bancorp. It trades about 0.02 of its potential returns per unit of risk. Five Star Bancorp is currently generating about -0.08 per unit of risk. If you would invest  7,086  in Citigroup on December 25, 2024 and sell it today you would earn a total of  112.00  from holding Citigroup or generate 1.58% return on investment over 90 days.

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

Citigroup  vs.  Five Star Bancorp

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Five Star Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Five Star Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Citigroup and Five Star

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

The idea behind Citigroup and Five Star Bancorp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.