Correlation Between Citigroup and Longleaf Partners

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

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

Diversification Opportunities for Citigroup and Longleaf Partners

0.02

Correlation Coefficient

Citigroup  Longleaf Partners

Significant diversification

The 3 months correlation between Citigroup and Longleaf is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Longleaf Partners Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longleaf Partners 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 Longleaf Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longleaf Partners has no effect on the direction of Citigroup i.e., Citigroup and Longleaf Partners go up and down completely randomly.

Pair Corralation between Citigroup and Longleaf Partners

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.28 times less return on investment than Longleaf Partners. In addition to that, Citigroup is 2.24 times more volatile than Longleaf Partners International. It trades about 0.01 of its total potential returns per unit of risk. Longleaf Partners International is currently generating about 0.04 per unit of volatility. If you would invest  1,502  in Longleaf Partners International on December 29, 2024 and sell it today you would earn a total of  32.00  from holding Longleaf Partners International or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  Longleaf Partners Internationa

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Longleaf Partners

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Longleaf Partners International are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Longleaf Partners 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 Longleaf Partners

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

The idea behind Citigroup and Longleaf Partners International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.