Correlation Between Citigroup and PMI

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

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

Diversification Opportunities for Citigroup and PMI

-0.3

Correlation Coefficient

Citigroup  PMI

Very good diversification

The 3 months correlation between Citigroup and PMI is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and The PMI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PMI Group 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 PMI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PMI Group has no effect on the direction of Citigroup i.e., Citigroup and PMI go up and down completely randomly.

Pair Corralation between Citigroup and PMI

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.06 times more return on investment than PMI. However, Citigroup is 17.16 times less risky than PMI. It trades about 0.07 of its potential returns per unit of risk. The PMI Group is currently generating about -0.22 per unit of risk. If you would invest  6,975  in Citigroup on September 27, 2024 and sell it today you would earn a total of  125.00  from holding Citigroup or generate 1.79% return on investment over 90 days.

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

Citigroup  vs.  The PMI Group

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

PMI Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The PMI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Citigroup and PMI

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

The idea behind Citigroup and The PMI Group 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.