Correlation Between Citigroup and Fundamental Large

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

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

Diversification Opportunities for Citigroup and Fundamental Large

0.95

Correlation Coefficient

Citigroup  Fundamental Large

Almost no diversification

The 3 months correlation between Citigroup and Fundamental is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fundamental Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Large 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 Fundamental Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Large Cap has no effect on the direction of Citigroup i.e., Citigroup and Fundamental Large go up and down completely randomly.

Pair Corralation between Citigroup and Fundamental Large

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.39 times more return on investment than Fundamental Large. However, Citigroup is 2.39 times more volatile than Fundamental Large Cap. It trades about 0.12 of its potential returns per unit of risk. Fundamental Large Cap is currently generating about 0.05 per unit of risk. If you would invest  6,083  in Citigroup on September 24, 2024 and sell it today you would earn a total of  894.00  from holding Citigroup or generate 14.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  Fundamental Large Cap

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fundamental Large Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Large Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fundamental Large 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 Fundamental Large

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

The idea behind Citigroup and Fundamental Large Cap 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.