Correlation Between Citigroup and Iron

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

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

Diversification Opportunities for Citigroup and Iron

-0.53

Correlation Coefficient

Citigroup  Iron

Excellent diversification

The 3 months correlation between Citigroup and Iron is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Iron And Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron And Steel 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 Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron And Steel has no effect on the direction of Citigroup i.e., Citigroup and Iron go up and down completely randomly.

Pair Corralation between Citigroup and Iron

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Iron. In addition to that, Citigroup is 1.06 times more volatile than Iron And Steel. It trades about -0.2 of its total potential returns per unit of risk. Iron And Steel is currently generating about 0.12 per unit of volatility. If you would invest  420.00  in Iron And Steel on December 5, 2024 and sell it today you would earn a total of  18.00  from holding Iron And Steel or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Citigroup  vs.  Iron And Steel

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Iron And Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iron And Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Iron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Iron

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

The idea behind Citigroup and Iron And Steel 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.