Correlation Between Citigroup and Mentor Capital

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

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

Diversification Opportunities for Citigroup and Mentor Capital

-0.41

Correlation Coefficient

Citigroup  Mentor Capital

Very good diversification

The 3 months correlation between Citigroup and Mentor is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Mentor Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mentor Capital 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 Mentor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mentor Capital has no effect on the direction of Citigroup i.e., Citigroup and Mentor Capital go up and down completely randomly.

Pair Corralation between Citigroup and Mentor Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.11 times less return on investment than Mentor Capital. But when comparing it to its historical volatility, Citigroup is 6.78 times less risky than Mentor Capital. It trades about 0.14 of its potential returns per unit of risk. Mentor Capital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Mentor Capital on September 4, 2024 and sell it today you would lose (0.90) from holding Mentor Capital or give up 12.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Mentor Capital

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.

Mentor Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mentor Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Mentor Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Mentor Capital

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

The idea behind Citigroup and Mentor Capital 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.