Correlation Between Citigroup and Ceylon Guardian

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

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

Diversification Opportunities for Citigroup and Ceylon Guardian

0.77

Correlation Coefficient

Citigroup  Ceylon Guardian

Poor diversification

The 3 months correlation between Citigroup and Ceylon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ceylon Guardian Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Guardian Inve 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 Ceylon Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Guardian Inve has no effect on the direction of Citigroup i.e., Citigroup and Ceylon Guardian go up and down completely randomly.

Pair Corralation between Citigroup and Ceylon Guardian

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.62 times less return on investment than Ceylon Guardian. But when comparing it to its historical volatility, Citigroup is 2.17 times less risky than Ceylon Guardian. It trades about 0.09 of its potential returns per unit of risk. Ceylon Guardian Investment is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  10,850  in Ceylon Guardian Investment on December 4, 2024 and sell it today you would earn a total of  4,850  from holding Ceylon Guardian Investment or generate 44.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.61%
Values	Daily Returns

Citigroup  vs.  Ceylon Guardian Investment

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ceylon Guardian Inve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Guardian Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Guardian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Ceylon Guardian

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

The idea behind Citigroup and Ceylon Guardian Investment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.