Correlation Between Citigroup and LSK
Can any of the company-specific risk be diversified away by investing in both Citigroup and LSK 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 LSK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and LSK, you can compare the effects of market volatilities on Citigroup and LSK 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 LSK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and LSK.
Diversification Opportunities for Citigroup and LSK
Poor diversification
The 3 months correlation between Citigroup and LSK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LSK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LSK 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 LSK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LSK has no effect on the direction of Citigroup i.e., Citigroup and LSK go up and down completely randomly.
Pair Corralation between Citigroup and LSK
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.68 times less return on investment than LSK. But when comparing it to its historical volatility, Citigroup is 4.38 times less risky than LSK. It trades about 0.07 of its potential returns per unit of risk. LSK is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 73.00 in LSK on September 25, 2024 and sell it today you would earn a total of 22.00 from holding LSK or generate 30.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 60.28% |
Values | Daily Returns |
Citigroup vs. LSK
Performance |
Timeline |
Citigroup |
LSK |
Citigroup and LSK Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and LSK
The main advantage of trading using opposite Citigroup and LSK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, LSK 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 LSK will offset losses from the drop in LSK's long position.The idea behind Citigroup and LSK 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.Check out your portfolio center.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
Transaction History View history of all your transactions and understand their impact on performance | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation |