Correlation Between Citigroup and Kansas Municipal

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

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

Diversification Opportunities for Citigroup and Kansas Municipal

0.1

Correlation Coefficient

Citigroup  Kansas Municipal

Average diversification

The 3 months correlation between Citigroup and Kansas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Kansas Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansas Municipal 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 Kansas Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansas Municipal has no effect on the direction of Citigroup i.e., Citigroup and Kansas Municipal go up and down completely randomly.

Pair Corralation between Citigroup and Kansas Municipal

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.44 times more return on investment than Kansas Municipal. However, Citigroup is 5.44 times more volatile than Kansas Municipal Fund. It trades about 0.1 of its potential returns per unit of risk. Kansas Municipal Fund is currently generating about -0.32 per unit of risk. If you would invest  7,186  in Citigroup on October 10, 2024 and sell it today you would earn a total of  182.00  from holding Citigroup or generate 2.53% return on investment over 90 days.

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

Citigroup  vs.  Kansas Municipal Fund

Citigroup

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Kansas Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kansas Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Kansas Municipal 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 Kansas Municipal

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

The idea behind Citigroup and Kansas Municipal Fund 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.