Correlation Between Citigroup and Canada Rare

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

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

Diversification Opportunities for Citigroup and Canada Rare

0.41

Correlation Coefficient

Citigroup  Canada Rare

Very weak diversification

The 3 months correlation between Citigroup and Canada is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Canada Rare Earth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canada Rare Earth 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 Canada Rare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canada Rare Earth has no effect on the direction of Citigroup i.e., Citigroup and Canada Rare go up and down completely randomly.

Pair Corralation between Citigroup and Canada Rare

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.47 times less return on investment than Canada Rare. But when comparing it to its historical volatility, Citigroup is 8.81 times less risky than Canada Rare. It trades about 0.07 of its potential returns per unit of risk. Canada Rare Earth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Canada Rare Earth on September 27, 2024 and sell it today you would lose (2.00) from holding Canada Rare Earth or give up 50.0% of portfolio value over 90 days.

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

Citigroup  vs.  Canada Rare Earth

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.

Canada Rare Earth

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Rare Earth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Canada Rare showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Canada Rare

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

The idea behind Citigroup and Canada Rare Earth 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.