Correlation Between Citigroup and Real Heart

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

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

Diversification Opportunities for Citigroup and Real Heart

0.56

Correlation Coefficient

Citigroup  Real Heart

Very weak diversification

The 3 months correlation between Citigroup and Real is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Real Heart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Heart 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 Real Heart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Heart has no effect on the direction of Citigroup i.e., Citigroup and Real Heart go up and down completely randomly.

Pair Corralation between Citigroup and Real Heart

Taking into account the 90-day investment horizon Citigroup is expected to generate 16.71 times less return on investment than Real Heart. But when comparing it to its historical volatility, Citigroup is 8.05 times less risky than Real Heart. It trades about 0.03 of its potential returns per unit of risk. Real Heart is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,186  in Real Heart on December 29, 2024 and sell it today you would earn a total of  194.00  from holding Real Heart or generate 16.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  Real Heart

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Real Heart

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Real Heart are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Real Heart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Real Heart

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

The idea behind Citigroup and Real Heart 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.