Correlation Between Citigroup and Limitless Venture

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

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

Diversification Opportunities for Citigroup and Limitless Venture

0.09

Correlation Coefficient

Citigroup  Limitless Venture

Significant diversification

The 3 months correlation between Citigroup and Limitless is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Limitless Venture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limitless Venture 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 Limitless Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limitless Venture has no effect on the direction of Citigroup i.e., Citigroup and Limitless Venture go up and down completely randomly.

Pair Corralation between Citigroup and Limitless Venture

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.41 times less return on investment than Limitless Venture. But when comparing it to its historical volatility, Citigroup is 5.21 times less risky than Limitless Venture. It trades about 0.16 of its potential returns per unit of risk. Limitless Venture is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.04  in Limitless Venture on September 18, 2024 and sell it today you would earn a total of  0.00  from holding Limitless Venture or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Limitless Venture

Citigroup

Risk-Adjusted Performance

12 of 100

Good

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

Limitless Venture

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Limitless Venture are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical and fundamental indicators, Limitless Venture demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Limitless Venture

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

The idea behind Citigroup and Limitless Venture 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.