Correlation Between Citigroup and Perkins Small

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

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

Diversification Opportunities for Citigroup and Perkins Small

0.88

Correlation Coefficient

Citigroup  Perkins Small

Very poor diversification

The 3 months correlation between Citigroup and Perkins is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small 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 Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Perkins Small go up and down completely randomly.

Pair Corralation between Citigroup and Perkins Small

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.54 times more return on investment than Perkins Small. However, Citigroup is 1.54 times more volatile than Perkins Small Cap. It trades about 0.17 of its potential returns per unit of risk. Perkins Small Cap is currently generating about 0.14 per unit of risk. If you would invest  5,902  in Citigroup on September 8, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.25% return on investment over 90 days.

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

Citigroup  vs.  Perkins Small Cap

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Perkins Small Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Perkins Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Perkins Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Perkins Small

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

The idea behind Citigroup and Perkins Small 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.