Correlation Between Citigroup and KCAP Financial

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

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

Diversification Opportunities for Citigroup and KCAP Financial

0.0

Correlation Coefficient

Citigroup  KCAP Financial

Pay attention - limited upside

The 3 months correlation between Citigroup and KCAP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and KCAP Financial SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KCAP Financial SR 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 KCAP Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KCAP Financial SR has no effect on the direction of Citigroup i.e., Citigroup and KCAP Financial go up and down completely randomly.

Pair Corralation between Citigroup and KCAP Financial

If you would invest  4,308  in Citigroup on September 26, 2024 and sell it today you would earn a total of  2,792  from holding Citigroup or generate 64.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Citigroup  vs.  KCAP Financial SR

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

KCAP Financial SR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KCAP Financial SR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, KCAP Financial is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and KCAP Financial

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

The idea behind Citigroup and KCAP Financial SR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.