Correlation Between Citigroup and M3 Brigade

Can any of the company-specific risk be diversified away by investing in both Citigroup and M3 Brigade 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 M3 Brigade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and M3 Brigade Acquisition V, you can compare the effects of market volatilities on Citigroup and M3 Brigade 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 M3 Brigade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and M3 Brigade.

Diversification Opportunities for Citigroup and M3 Brigade

0.46

Correlation Coefficient

Citigroup  M3 Brigade

Very weak diversification

The 3 months correlation between Citigroup and MBAV is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and M3 Brigade Acquisition V in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on M3 Brigade Acquisition 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 M3 Brigade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of M3 Brigade Acquisition has no effect on the direction of Citigroup i.e., Citigroup and M3 Brigade go up and down completely randomly.

Pair Corralation between Citigroup and M3 Brigade

Taking into account the 90-day investment horizon Citigroup is expected to generate 19.09 times more return on investment than M3 Brigade. However, Citigroup is 19.09 times more volatile than M3 Brigade Acquisition V. It trades about 0.14 of its potential returns per unit of risk. M3 Brigade Acquisition V is currently generating about 0.13 per unit of risk. If you would invest  3,675  in Citigroup on September 19, 2024 and sell it today you would earn a total of  3,137  from holding Citigroup or generate 85.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	21.38%
Values	Daily Returns

Citigroup  vs.  M3 Brigade Acquisition V

Citigroup

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) 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.

M3 Brigade Acquisition

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in M3 Brigade Acquisition V are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, M3 Brigade is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and M3 Brigade

The main advantage of trading using opposite Citigroup and M3 Brigade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, M3 Brigade 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 M3 Brigade will offset losses from the drop in M3 Brigade's long position.

The idea behind Citigroup and M3 Brigade Acquisition V 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.