Correlation Between Citigroup and Labor Smart

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

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

Diversification Opportunities for Citigroup and Labor Smart

0.63

Correlation Coefficient

Citigroup  Labor Smart

Poor diversification

The 3 months correlation between Citigroup and Labor is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Labor Smart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Labor Smart 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 Labor Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Labor Smart has no effect on the direction of Citigroup i.e., Citigroup and Labor Smart go up and down completely randomly.

Pair Corralation between Citigroup and Labor Smart

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.27 times more return on investment than Labor Smart. However, Citigroup is 3.65 times less risky than Labor Smart. It trades about 0.04 of its potential returns per unit of risk. Labor Smart is currently generating about -0.02 per unit of risk. If you would invest  6,929  in Citigroup on December 21, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

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

Citigroup  vs.  Labor Smart

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Labor Smart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Labor Smart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Citigroup and Labor Smart

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

The idea behind Citigroup and Labor Smart 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.