Correlation Between Citigroup and Orca

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

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

Diversification Opportunities for Citigroup and Orca

-0.2

Correlation Coefficient

Citigroup  Orca

Good diversification

The 3 months correlation between Citigroup and Orca is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Orca in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orca 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 Orca. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orca has no effect on the direction of Citigroup i.e., Citigroup and Orca go up and down completely randomly.

Pair Corralation between Citigroup and Orca

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.67 times less return on investment than Orca. But when comparing it to its historical volatility, Citigroup is 8.16 times less risky than Orca. It trades about 0.03 of its potential returns per unit of risk. Orca is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  391.00  in Orca on December 29, 2024 and sell it today you would lose (126.00) from holding Orca or give up 32.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

Citigroup  vs.  Orca

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

Orca

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orca are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Orca exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Orca

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

The idea behind Citigroup and Orca 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.