Correlation Between Citigroup and Lithium Americas

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

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

Diversification Opportunities for Citigroup and Lithium Americas

-0.19

Correlation Coefficient

Citigroup  Lithium Americas

Good diversification

The 3 months correlation between Citigroup and Lithium is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lithium Americas Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Americas Corp 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 Lithium Americas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Americas Corp has no effect on the direction of Citigroup i.e., Citigroup and Lithium Americas go up and down completely randomly.

Pair Corralation between Citigroup and Lithium Americas

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.43 times more return on investment than Lithium Americas. However, Citigroup is 2.32 times less risky than Lithium Americas. It trades about 0.07 of its potential returns per unit of risk. Lithium Americas Corp is currently generating about -0.03 per unit of risk. If you would invest  4,381  in Citigroup on September 28, 2024 and sell it today you would earn a total of  2,719  from holding Citigroup or generate 62.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  Lithium Americas Corp

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.

Lithium Americas Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Lithium Americas is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Lithium Americas

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

The idea behind Citigroup and Lithium Americas Corp 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 CEOs Directory module to screen CEOs from public companies around the world.