Correlation Between Citigroup and Starwood Hotels

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

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

Diversification Opportunities for Citigroup and Starwood Hotels

0.0

Correlation Coefficient

Citigroup  Starwood Hotels

Pay attention - limited upside

The 3 months correlation between Citigroup and Starwood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Starwood Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starwood Hotels Resorts 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 Starwood Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starwood Hotels Resorts has no effect on the direction of Citigroup i.e., Citigroup and Starwood Hotels go up and down completely randomly.

Pair Corralation between Citigroup and Starwood Hotels

If you would invest  6,209  in Citigroup on October 15, 2024 and sell it today you would earn a total of  931.00  from holding Citigroup or generate 14.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Citigroup  vs.  Starwood Hotels Resorts

Citigroup

Risk-Adjusted Performance

11 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Starwood Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starwood Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Starwood Hotels is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Starwood Hotels

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

The idea behind Citigroup and Starwood Hotels Resorts 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.