Correlation Between Citigroup and High Tech

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

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

Diversification Opportunities for Citigroup and High Tech

-0.31

Correlation Coefficient

Citigroup  High Tech

Very good diversification

The 3 months correlation between Citigroup and High is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and High Tech Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Tech Metals 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 High Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Tech Metals has no effect on the direction of Citigroup i.e., Citigroup and High Tech go up and down completely randomly.

Pair Corralation between Citigroup and High Tech

Taking into account the 90-day investment horizon Citigroup is expected to generate 9.06 times less return on investment than High Tech. But when comparing it to its historical volatility, Citigroup is 4.1 times less risky than High Tech. It trades about 0.05 of its potential returns per unit of risk. High Tech Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  16.00  in High Tech Metals on December 20, 2024 and sell it today you would earn a total of  7.00  from holding High Tech Metals or generate 43.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  High Tech Metals

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.

High Tech Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in High Tech Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, High Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and High Tech

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

The idea behind Citigroup and High Tech Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.