Correlation Between Citigroup and MFEC PCL

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

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

Diversification Opportunities for Citigroup and MFEC PCL

0.61

Correlation Coefficient

Citigroup  MFEC PCL

Poor diversification

The 3 months correlation between Citigroup and MFEC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and MFEC PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFEC PCL 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 MFEC PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFEC PCL has no effect on the direction of Citigroup i.e., Citigroup and MFEC PCL go up and down completely randomly.

Pair Corralation between Citigroup and MFEC PCL

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.4 times more return on investment than MFEC PCL. However, Citigroup is 1.4 times more volatile than MFEC PCL. It trades about 0.19 of its potential returns per unit of risk. MFEC PCL is currently generating about 0.05 per unit of risk. If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,408  from holding Citigroup or generate 24.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  MFEC PCL

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

MFEC PCL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MFEC PCL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, MFEC PCL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and MFEC PCL

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

The idea behind Citigroup and MFEC PCL 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.