Correlation Between Citigroup and Monarca Minerals

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

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

Diversification Opportunities for Citigroup and Monarca Minerals

0.06

Correlation Coefficient

Citigroup  Monarca Minerals

Significant diversification

The 3 months correlation between Citigroup and Monarca is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Monarca Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monarca Minerals 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 Monarca Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monarca Minerals has no effect on the direction of Citigroup i.e., Citigroup and Monarca Minerals go up and down completely randomly.

Pair Corralation between Citigroup and Monarca Minerals

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.25 times less return on investment than Monarca Minerals. But when comparing it to its historical volatility, Citigroup is 10.87 times less risky than Monarca Minerals. It trades about 0.28 of its potential returns per unit of risk. Monarca Minerals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.40  in Monarca Minerals on September 9, 2024 and sell it today you would earn a total of  0.04  from holding Monarca Minerals or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Monarca Minerals

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Monarca Minerals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monarca Minerals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, Monarca Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Monarca Minerals

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

The idea behind Citigroup and Monarca Minerals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.