Correlation Between Citigroup and Harn Engineering

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

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

Diversification Opportunities for Citigroup and Harn Engineering

-0.53

Correlation Coefficient

Citigroup  Harn Engineering

Excellent diversification

The 3 months correlation between Citigroup and Harn is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Harn Engineering Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harn Engineering Sol 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 Harn Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harn Engineering Sol has no effect on the direction of Citigroup i.e., Citigroup and Harn Engineering go up and down completely randomly.

Pair Corralation between Citigroup and Harn Engineering

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.94 times more return on investment than Harn Engineering. However, Citigroup is 1.94 times more volatile than Harn Engineering Solutions. It trades about 0.24 of its potential returns per unit of risk. Harn Engineering Solutions is currently generating about -0.06 per unit of risk. If you would invest  6,129  in Citigroup on October 20, 2024 and sell it today you would earn a total of  1,870  from holding Citigroup or generate 30.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  Harn Engineering Solutions

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Harn Engineering Sol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harn Engineering Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Harn Engineering is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Harn Engineering

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

The idea behind Citigroup and Harn Engineering Solutions 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.