Correlation Between Citigroup and Forward Water

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

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

Diversification Opportunities for Citigroup and Forward Water

-0.52

Correlation Coefficient

Citigroup  Forward Water

Excellent diversification

The 3 months correlation between Citigroup and Forward is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno 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 Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of Citigroup i.e., Citigroup and Forward Water go up and down completely randomly.

Pair Corralation between Citigroup and Forward Water

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.07 times less return on investment than Forward Water. But when comparing it to its historical volatility, Citigroup is 10.91 times less risky than Forward Water. It trades about 0.22 of its potential returns per unit of risk. Forward Water Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Forward Water Technologies on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Forward Water Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Forward Water Technologies

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Forward Water Techno

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Forward Water Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Forward Water showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Forward Water

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

The idea behind Citigroup and Forward Water Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.