Correlation Between Citigroup and Horizon Space

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

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

Diversification Opportunities for Citigroup and Horizon Space

0.7

Correlation Coefficient

Citigroup  Horizon Space

Poor diversification

The 3 months correlation between Citigroup and Horizon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Horizon Space Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Space Acquisition 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 Horizon Space. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Space Acquisition has no effect on the direction of Citigroup i.e., Citigroup and Horizon Space go up and down completely randomly.

Pair Corralation between Citigroup and Horizon Space

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.81 times more return on investment than Horizon Space. However, Citigroup is 1.81 times more volatile than Horizon Space Acquisition. It trades about 0.25 of its potential returns per unit of risk. Horizon Space Acquisition is currently generating about 0.12 per unit of risk. If you would invest  6,360  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,809  from holding Citigroup or generate 28.44% return on investment over 90 days.

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

Citigroup  vs.  Horizon Space Acquisition

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Horizon Space Acquisition

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Space Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Horizon Space may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Horizon Space

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

The idea behind Citigroup and Horizon Space Acquisition 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.