Correlation Between Citigroup and Mmzbx

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

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

Diversification Opportunities for Citigroup and Mmzbx

-0.03

Correlation Coefficient

Citigroup  Mmzbx

Good diversification

The 3 months correlation between Citigroup and Mmzbx is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Mmzbx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mmzbx 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 Mmzbx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mmzbx has no effect on the direction of Citigroup i.e., Citigroup and Mmzbx go up and down completely randomly.

Pair Corralation between Citigroup and Mmzbx

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.78 times more return on investment than Mmzbx. However, Citigroup is 1.28 times less risky than Mmzbx. It trades about 0.07 of its potential returns per unit of risk. Mmzbx is currently generating about 0.03 per unit of risk. If you would invest  4,381  in Citigroup on September 30, 2024 and sell it today you would earn a total of  2,719  from holding Citigroup or generate 62.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.57%
Values	Daily Returns

Citigroup  vs.  Mmzbx

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Mmzbx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mmzbx has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Mmzbx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Mmzbx

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

The idea behind Citigroup and Mmzbx 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.