Correlation Between Citigroup and Advantage Portfolio

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

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

Diversification Opportunities for Citigroup and Advantage Portfolio

0.96

Correlation Coefficient

Citigroup  Advantage Portfolio

Almost no diversification

The 3 months correlation between Citigroup and Advantage is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Advantage Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Portfolio Class 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 Advantage Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Portfolio Class has no effect on the direction of Citigroup i.e., Citigroup and Advantage Portfolio go up and down completely randomly.

Pair Corralation between Citigroup and Advantage Portfolio

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.84 times more return on investment than Advantage Portfolio. However, Citigroup is 1.2 times less risky than Advantage Portfolio. It trades about 0.02 of its potential returns per unit of risk. Advantage Portfolio Class is currently generating about -0.03 per unit of risk. If you would invest  7,075  in Citigroup on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Citigroup or generate 0.35% return on investment over 90 days.

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

Citigroup  vs.  Advantage Portfolio Class

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.

Advantage Portfolio Class

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Portfolio Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Advantage Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Advantage Portfolio

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

The idea behind Citigroup and Advantage Portfolio Class 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 Stocks Directory module to find actively traded stocks across global markets.