Correlation Between Citigroup and Grid Metals

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

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

Diversification Opportunities for Citigroup and Grid Metals

-0.34

Correlation Coefficient

Citigroup  Grid Metals

Very good diversification

The 3 months correlation between Citigroup and Grid is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Citigroup i.e., Citigroup and Grid Metals go up and down completely randomly.

Pair Corralation between Citigroup and Grid Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.51 times less return on investment than Grid Metals. But when comparing it to its historical volatility, Citigroup is 5.29 times less risky than Grid Metals. It trades about 0.13 of its potential returns per unit of risk. Grid Metals Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2.13  in Grid Metals Corp on December 2, 2024 and sell it today you would earn a total of  0.61  from holding Grid Metals Corp or generate 28.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Grid Metals Corp

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Grid Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Grid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Grid Metals

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

The idea behind Citigroup and Grid Metals Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.