Correlation Between Citigroup and Heartland Value

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

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

Diversification Opportunities for Citigroup and Heartland Value

0.8

Correlation Coefficient

Citigroup  Heartland Value

Very poor diversification

The 3 months correlation between Citigroup and Heartland is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Heartland Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Value 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 Heartland Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Value has no effect on the direction of Citigroup i.e., Citigroup and Heartland Value go up and down completely randomly.

Pair Corralation between Citigroup and Heartland Value

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.79 times more return on investment than Heartland Value. However, Citigroup is 1.79 times more volatile than Heartland Value Fund. It trades about 0.01 of its potential returns per unit of risk. Heartland Value Fund is currently generating about -0.07 per unit of risk. If you would invest  6,991  in Citigroup on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

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

Citigroup  vs.  Heartland Value Fund

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Heartland Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartland Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Heartland Value 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 Heartland Value

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

The idea behind Citigroup and Heartland Value Fund 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..