Correlation Between Citigroup and Arthur J

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

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

Diversification Opportunities for Citigroup and Arthur J

0.8

Correlation Coefficient

Citigroup  Arthur J

Very poor diversification

The 3 months correlation between Citigroup and Arthur is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arthur J Gallagher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arthur J Gallagher 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 Arthur J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arthur J Gallagher has no effect on the direction of Citigroup i.e., Citigroup and Arthur J go up and down completely randomly.

Pair Corralation between Citigroup and Arthur J

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.9 times more return on investment than Arthur J. However, Citigroup is 1.11 times less risky than Arthur J. It trades about 0.04 of its potential returns per unit of risk. Arthur J Gallagher is currently generating about -0.33 per unit of risk. If you would invest  7,016  in Citigroup on September 28, 2024 and sell it today you would earn a total of  59.50  from holding Citigroup or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Arthur J Gallagher

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arthur J Gallagher

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arthur J Gallagher are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arthur J may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Arthur J

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

The idea behind Citigroup and Arthur J Gallagher 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.