Correlation Between Citigroup and Mystate

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

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

Diversification Opportunities for Citigroup and Mystate

0.53

Correlation Coefficient

Citigroup  Mystate

Very weak diversification

The 3 months correlation between Citigroup and Mystate is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Mystate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mystate 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 Mystate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mystate has no effect on the direction of Citigroup i.e., Citigroup and Mystate go up and down completely randomly.

Pair Corralation between Citigroup and Mystate

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.22 times more return on investment than Mystate. However, Citigroup is 1.22 times more volatile than Mystate. It trades about 0.08 of its potential returns per unit of risk. Mystate is currently generating about 0.02 per unit of risk. If you would invest  5,641  in Citigroup on December 10, 2024 and sell it today you would earn a total of  1,100  from holding Citigroup or generate 19.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.4%
Values	Daily Returns

Citigroup  vs.  Mystate

Citigroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Mystate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mystate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mystate is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Mystate

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

The idea behind Citigroup and Mystate 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.