Correlation Between Citigroup and Caravelle International

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

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

Diversification Opportunities for Citigroup and Caravelle International

0.56

Correlation Coefficient

Citigroup  Caravelle International

Very weak diversification

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

Pair Corralation between Citigroup and Caravelle International

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.25 times less return on investment than Caravelle International. But when comparing it to its historical volatility, Citigroup is 5.48 times less risky than Caravelle International. It trades about 0.04 of its potential returns per unit of risk. Caravelle International Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Caravelle International Group on December 21, 2024 and sell it today you would lose (60.00) from holding Caravelle International Group or give up 24.0% of portfolio value over 90 days.

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

Citigroup  vs.  Caravelle International Group

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Caravelle International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caravelle International Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Caravelle International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Caravelle International

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

The idea behind Citigroup and Caravelle International Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.