Correlation Between Citigroup and Lighthouse Capital

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

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

Diversification Opportunities for Citigroup and Lighthouse Capital

-0.03

Correlation Coefficient

Citigroup  Lighthouse Capital

Good diversification

The 3 months correlation between Citigroup and Lighthouse is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lighthouse Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lighthouse Capital 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 Lighthouse Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lighthouse Capital has no effect on the direction of Citigroup i.e., Citigroup and Lighthouse Capital go up and down completely randomly.

Pair Corralation between Citigroup and Lighthouse Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.49 times less return on investment than Lighthouse Capital. But when comparing it to its historical volatility, Citigroup is 1.24 times less risky than Lighthouse Capital. It trades about 0.05 of its potential returns per unit of risk. Lighthouse Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  79,300  in Lighthouse Capital on October 9, 2024 and sell it today you would earn a total of  1,300  from holding Lighthouse Capital or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

Citigroup  vs.  Lighthouse Capital

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lighthouse Capital

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Citigroup and Lighthouse Capital

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

The idea behind Citigroup and Lighthouse Capital 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.