Correlation Between Citigroup and Mars Acquisition

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

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

Diversification Opportunities for Citigroup and Mars Acquisition

0.63

Correlation Coefficient

Citigroup  Mars Acquisition

Poor diversification

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

Pair Corralation between Citigroup and Mars Acquisition

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.76 times less return on investment than Mars Acquisition. But when comparing it to its historical volatility, Citigroup is 5.16 times less risky than Mars Acquisition. It trades about 0.09 of its potential returns per unit of risk. Mars Acquisition Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Mars Acquisition Corp on September 21, 2024 and sell it today you would earn a total of  5.11  from holding Mars Acquisition Corp or generate 15.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	86.36%
Values	Daily Returns

Citigroup  vs.  Mars Acquisition Corp

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mars Acquisition Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mars Acquisition Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Mars Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Mars Acquisition

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

The idea behind Citigroup and Mars Acquisition Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.