Correlation Between Citigroup and Templeton Global

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

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

Diversification Opportunities for Citigroup and Templeton Global

0.45

Correlation Coefficient

Citigroup  Templeton Global

Very weak diversification

The 3 months correlation between Citigroup and Templeton is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Templeton Global Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Templeton Global Income 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 Templeton Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Templeton Global Income has no effect on the direction of Citigroup i.e., Citigroup and Templeton Global go up and down completely randomly.

Pair Corralation between Citigroup and Templeton Global

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.94 times more return on investment than Templeton Global. However, Citigroup is 1.94 times more volatile than Templeton Global Income. It trades about 0.07 of its potential returns per unit of risk. Templeton Global Income is currently generating about 0.03 per unit of risk. If you would invest  4,219  in Citigroup on September 24, 2024 and sell it today you would earn a total of  2,700  from holding Citigroup or generate 64.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.11%
Values	Daily Returns

Citigroup  vs.  Templeton Global Income

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.

Templeton Global Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Templeton Global Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy forward indicators, Templeton Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Templeton Global

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

The idea behind Citigroup and Templeton Global Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.