Correlation Between Citigroup and Imagine Lithium

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

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

Diversification Opportunities for Citigroup and Imagine Lithium

-0.56

Correlation Coefficient

Citigroup  Imagine Lithium

Excellent diversification

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

Pair Corralation between Citigroup and Imagine Lithium

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.02 times less return on investment than Imagine Lithium. But when comparing it to its historical volatility, Citigroup is 5.31 times less risky than Imagine Lithium. It trades about 0.13 of its potential returns per unit of risk. Imagine Lithium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Imagine Lithium on September 3, 2024 and sell it today you would lose (0.50) from holding Imagine Lithium or give up 16.67% of portfolio value over 90 days.

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

Citigroup  vs.  Imagine Lithium

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Imagine Lithium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Imagine Lithium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Imagine Lithium showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Imagine Lithium

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

The idea behind Citigroup and Imagine Lithium 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 Valuation module to check real value of public entities based on technical and fundamental data.