Correlation Between Citigroup and Precious Metals

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

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

Diversification Opportunities for Citigroup and Precious Metals

0.75

Correlation Coefficient

Citigroup  Precious Metals

Poor diversification

The 3 months correlation between Citigroup and Precious is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Precious Metals Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals Ultr 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals Ultr has no effect on the direction of Citigroup i.e., Citigroup and Precious Metals go up and down completely randomly.

Pair Corralation between Citigroup and Precious Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.67 times more return on investment than Precious Metals. However, Citigroup is 1.49 times less risky than Precious Metals. It trades about 0.1 of its potential returns per unit of risk. Precious Metals Ultrasector is currently generating about 0.04 per unit of risk. If you would invest  5,817  in Citigroup on December 5, 2024 and sell it today you would earn a total of  1,418  from holding Citigroup or generate 24.38% return on investment over 90 days.

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

Citigroup  vs.  Precious Metals Ultrasector

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Precious Metals Ultr

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Precious Metals Ultrasector are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Precious Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and Precious Metals

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

The idea behind Citigroup and Precious Metals Ultrasector 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.