Correlation Between Citigroup and Financial Strategies

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

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

Diversification Opportunities for Citigroup and Financial Strategies

0.84

Correlation Coefficient

Citigroup  Financial Strategies

Very poor diversification

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

Pair Corralation between Citigroup and Financial Strategies

If you would invest  6,895  in Citigroup on October 22, 2024 and sell it today you would earn a total of  1,104  from holding Citigroup or generate 16.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	2.5%
Values	Daily Returns

Citigroup  vs.  Financial Strategies Acquisiti

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) 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.

Financial Strategies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Financial Strategies Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Financial Strategies is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Financial Strategies

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

The idea behind Citigroup and Financial Strategies Acquisition 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.