Correlation Between Citigroup and Affiliated Managers

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

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

Diversification Opportunities for Citigroup and Affiliated Managers

0.89

Correlation Coefficient

Citigroup  Affiliated Managers

Very poor diversification

The 3 months correlation between Citigroup and Affiliated is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Affiliated Managers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affiliated Managers 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 Affiliated Managers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affiliated Managers has no effect on the direction of Citigroup i.e., Citigroup and Affiliated Managers go up and down completely randomly.

Pair Corralation between Citigroup and Affiliated Managers

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.5 times more return on investment than Affiliated Managers. However, Citigroup is 2.5 times more volatile than Affiliated Managers Group. It trades about 0.01 of its potential returns per unit of risk. Affiliated Managers Group is currently generating about -0.01 per unit of risk. If you would invest  6,991  in Citigroup on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

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

Citigroup  vs.  Affiliated Managers Group

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Affiliated Managers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affiliated Managers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Affiliated Managers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Affiliated Managers

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

The idea behind Citigroup and Affiliated Managers Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.