Correlation Between Citigroup and PACCAR

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

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

Diversification Opportunities for Citigroup and PACCAR

0.92

Correlation Coefficient

Citigroup  PACCAR

Almost no diversification

The 3 months correlation between Citigroup and PACCAR is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Citigroup i.e., Citigroup and PACCAR go up and down completely randomly.

Pair Corralation between Citigroup and PACCAR

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.15 times less return on investment than PACCAR. In addition to that, Citigroup is 1.01 times more volatile than PACCAR Inc. It trades about 0.07 of its total potential returns per unit of risk. PACCAR Inc is currently generating about 0.08 per unit of volatility. If you would invest  5,647  in PACCAR Inc on September 28, 2024 and sell it today you would earn a total of  4,393  from holding PACCAR Inc or generate 77.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  PACCAR Inc

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

PACCAR Inc

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and PACCAR

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

The idea behind Citigroup and PACCAR Inc 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.