Correlation Between Citigroup and Gossan Resources

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

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

Diversification Opportunities for Citigroup and Gossan Resources

-0.52

Correlation Coefficient

Citigroup  Gossan Resources

Excellent diversification

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

Pair Corralation between Citigroup and Gossan Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 13.8 times less return on investment than Gossan Resources. But when comparing it to its historical volatility, Citigroup is 13.41 times less risky than Gossan Resources. It trades about 0.06 of its potential returns per unit of risk. Gossan Resources Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.04  in Gossan Resources Limited on September 28, 2024 and sell it today you would lose (1.07) from holding Gossan Resources Limited or give up 52.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.13%
Values	Daily Returns

Citigroup  vs.  Gossan Resources Limited

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.

Gossan Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gossan Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and Gossan Resources

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

The idea behind Citigroup and Gossan Resources Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.