Correlation Between Citigroup and James Alpha

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

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

Diversification Opportunities for Citigroup and James Alpha

0.82

Correlation Coefficient

Citigroup  James Alpha

Very poor diversification

The 3 months correlation between Citigroup and James is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and James Alpha Structured in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Alpha Structured 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 James Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Alpha Structured has no effect on the direction of Citigroup i.e., Citigroup and James Alpha go up and down completely randomly.

Pair Corralation between Citigroup and James Alpha

Taking into account the 90-day investment horizon Citigroup is expected to generate 12.6 times more return on investment than James Alpha. However, Citigroup is 12.6 times more volatile than James Alpha Structured. It trades about 0.21 of its potential returns per unit of risk. James Alpha Structured is currently generating about 0.19 per unit of risk. If you would invest  6,946  in Citigroup on December 2, 2024 and sell it today you would earn a total of  1,049  from holding Citigroup or generate 15.1% return on investment over 90 days.

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

Citigroup  vs.  James Alpha Structured

Citigroup

Risk-Adjusted Performance

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.

James Alpha Structured

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in James Alpha Structured are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, James Alpha is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and James Alpha

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

The idea behind Citigroup and James Alpha Structured 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.