Correlation Between Citigroup and KLDiscovery

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

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

Diversification Opportunities for Citigroup and KLDiscovery

0.89

Correlation Coefficient

Citigroup  KLDiscovery

Very poor diversification

The 3 months correlation between Citigroup and KLDiscovery is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and KLDiscovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLDiscovery 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 KLDiscovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLDiscovery has no effect on the direction of Citigroup i.e., Citigroup and KLDiscovery go up and down completely randomly.

Pair Corralation between Citigroup and KLDiscovery

If you would invest  7,186  in Citigroup on October 9, 2024 and sell it today you would earn a total of  88.00  from holding Citigroup or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	5.26%
Values	Daily Returns

Citigroup  vs.  KLDiscovery

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

KLDiscovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLDiscovery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, KLDiscovery is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and KLDiscovery

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

The idea behind Citigroup and KLDiscovery 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.