Correlation Between Citigroup and Harbor Small

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

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

Diversification Opportunities for Citigroup and Harbor Small

0.84

Correlation Coefficient

Citigroup  Harbor Small

Very poor diversification

The 3 months correlation between Citigroup and Harbor is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Harbor Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Small Cap 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 Harbor Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Harbor Small go up and down completely randomly.

Pair Corralation between Citigroup and Harbor Small

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.73 times more return on investment than Harbor Small. However, Citigroup is 1.73 times more volatile than Harbor Small Cap. It trades about 0.18 of its potential returns per unit of risk. Harbor Small Cap is currently generating about 0.04 per unit of risk. If you would invest  5,788  in Citigroup on September 16, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Harbor Small Cap

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Harbor Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Harbor Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Harbor Small

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

The idea behind Citigroup and Harbor Small Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.