Correlation Between Citigroup and Graf Acquisition

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

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

Diversification Opportunities for Citigroup and Graf Acquisition

0.85

Correlation Coefficient

Citigroup  Graf Acquisition

Very poor diversification

The 3 months correlation between Citigroup and Graf is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Graf Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graf Acquisition Corp 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 Graf Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graf Acquisition Corp has no effect on the direction of Citigroup i.e., Citigroup and Graf Acquisition go up and down completely randomly.

Pair Corralation between Citigroup and Graf Acquisition

If you would invest  5,788  in Citigroup on September 16, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.54%
Values	Daily Returns

Citigroup  vs.  Graf Acquisition Corp

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Graf Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graf Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Graf Acquisition is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Graf Acquisition

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

The idea behind Citigroup and Graf Acquisition Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.