Correlation Between Citigroup and Unconstrained Bond

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

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

Diversification Opportunities for Citigroup and Unconstrained Bond

-0.71

Correlation Coefficient

Citigroup  Unconstrained Bond

Pay attention - limited upside

The 3 months correlation between Citigroup and Unconstrained is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Unconstrained Bond Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unconstrained Bond Series 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 Unconstrained Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unconstrained Bond Series has no effect on the direction of Citigroup i.e., Citigroup and Unconstrained Bond go up and down completely randomly.

Pair Corralation between Citigroup and Unconstrained Bond

Taking into account the 90-day investment horizon Citigroup is expected to generate 14.02 times more return on investment than Unconstrained Bond. However, Citigroup is 14.02 times more volatile than Unconstrained Bond Series. It trades about 0.15 of its potential returns per unit of risk. Unconstrained Bond Series is currently generating about -0.02 per unit of risk. If you would invest  6,010  in Citigroup on September 5, 2024 and sell it today you would earn a total of  1,132  from holding Citigroup or generate 18.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Unconstrained Bond Series

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Unconstrained Bond Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unconstrained Bond Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Unconstrained Bond 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 Unconstrained Bond

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

The idea behind Citigroup and Unconstrained Bond Series 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.