Correlation Between Citigroup and Hamilton MidSmall

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

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

Diversification Opportunities for Citigroup and Hamilton MidSmall

0.87

Correlation Coefficient

Citigroup  Hamilton MidSmall

Very poor diversification

The 3 months correlation between Citigroup and Hamilton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hamilton MidSmall Cap Financia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hamilton MidSmall Cap 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 Hamilton MidSmall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hamilton MidSmall Cap has no effect on the direction of Citigroup i.e., Citigroup and Hamilton MidSmall go up and down completely randomly.

Pair Corralation between Citigroup and Hamilton MidSmall

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.66 times more return on investment than Hamilton MidSmall. However, Citigroup is 1.66 times more volatile than Hamilton MidSmall Cap Financials. It trades about 0.04 of its potential returns per unit of risk. Hamilton MidSmall Cap Financials is currently generating about -0.04 per unit of risk. If you would invest  6,929  in Citigroup on December 21, 2024 and sell it today you would earn a total of  253.00  from holding Citigroup or generate 3.65% return on investment over 90 days.

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

Citigroup  vs.  Hamilton MidSmall Cap Financia

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.

Hamilton MidSmall Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Citigroup and Hamilton MidSmall

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

The idea behind Citigroup and Hamilton MidSmall Cap Financials 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.