Correlation Between Citigroup and Highland Copper

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

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

Diversification Opportunities for Citigroup and Highland Copper

-0.44

Correlation Coefficient

Citigroup  Highland Copper

Very good diversification

The 3 months correlation between Citigroup and Highland is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper 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 Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of Citigroup i.e., Citigroup and Highland Copper go up and down completely randomly.

Pair Corralation between Citigroup and Highland Copper

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.21 times less return on investment than Highland Copper. But when comparing it to its historical volatility, Citigroup is 4.25 times less risky than Highland Copper. It trades about 0.07 of its potential returns per unit of risk. Highland Copper is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.06  in Highland Copper on September 20, 2024 and sell it today you would earn a total of  0.91  from holding Highland Copper or generate 17.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Citigroup  vs.  Highland Copper

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal 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 Highland Copper

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

The idea behind Citigroup and Highland Copper 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.