Correlation Between Citigroup and Launch One

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

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

Diversification Opportunities for Citigroup and Launch One

0.84

Correlation Coefficient

Citigroup  Launch One

Very poor diversification

The 3 months correlation between Citigroup and Launch is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Launch One Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Launch One Acquisition 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 Launch One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Launch One Acquisition has no effect on the direction of Citigroup i.e., Citigroup and Launch One go up and down completely randomly.

Pair Corralation between Citigroup and Launch One

Taking into account the 90-day investment horizon Citigroup is expected to generate 25.58 times more return on investment than Launch One. However, Citigroup is 25.58 times more volatile than Launch One Acquisition. It trades about 0.08 of its potential returns per unit of risk. Launch One Acquisition is currently generating about 0.08 per unit of risk. If you would invest  6,043  in Citigroup on September 25, 2024 and sell it today you would earn a total of  1,058  from holding Citigroup or generate 17.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	63.49%
Values	Daily Returns

Citigroup  vs.  Launch One Acquisition

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Launch One Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Launch One Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Launch One is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Launch One

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

The idea behind Citigroup and Launch One Acquisition 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.