Correlation Between Citigroup and Guaranty Trust

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

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

Diversification Opportunities for Citigroup and Guaranty Trust

0.69

Correlation Coefficient

Citigroup  Guaranty Trust

Poor diversification

The 3 months correlation between Citigroup and Guaranty is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of Citigroup i.e., Citigroup and Guaranty Trust go up and down completely randomly.

Pair Corralation between Citigroup and Guaranty Trust

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.55 times more return on investment than Guaranty Trust. However, Citigroup is 1.82 times less risky than Guaranty Trust. It trades about 0.11 of its potential returns per unit of risk. Guaranty Trust Holding is currently generating about -0.02 per unit of risk. If you would invest  4,567  in Citigroup on September 27, 2024 and sell it today you would earn a total of  2,533  from holding Citigroup or generate 55.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

Citigroup  vs.  Guaranty Trust Holding

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Guaranty Trust Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Guaranty Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Guaranty Trust

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

The idea behind Citigroup and Guaranty Trust Holding 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.