Correlation Between Citigroup and Old Dominion

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

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

Diversification Opportunities for Citigroup and Old Dominion

0.72

Correlation Coefficient

Citigroup  Old Dominion

Poor diversification

The 3 months correlation between Citigroup and Old is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Citigroup i.e., Citigroup and Old Dominion go up and down completely randomly.

Pair Corralation between Citigroup and Old Dominion

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.91 times more return on investment than Old Dominion. However, Citigroup is 1.1 times less risky than Old Dominion. It trades about 0.04 of its potential returns per unit of risk. Old Dominion Freight is currently generating about -0.04 per unit of risk. If you would invest  7,051  in Citigroup on December 27, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Old Dominion Freight

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Old Dominion Freight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Old Dominion is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Old Dominion

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

The idea behind Citigroup and Old Dominion Freight 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.