Correlation Between Citigroup and Pacific Funds

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

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

Diversification Opportunities for Citigroup and Pacific Funds

0.88

Correlation Coefficient

Citigroup  Pacific Funds

Very poor diversification

The 3 months correlation between Citigroup and Pacific is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pacific Funds Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Funds Portfolio 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 Pacific Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Funds Portfolio has no effect on the direction of Citigroup i.e., Citigroup and Pacific Funds go up and down completely randomly.

Pair Corralation between Citigroup and Pacific Funds

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.28 times more return on investment than Pacific Funds. However, Citigroup is 2.28 times more volatile than Pacific Funds Portfolio. It trades about 0.01 of its potential returns per unit of risk. Pacific Funds Portfolio is currently generating about -0.03 per unit of risk. If you would invest  6,991  in Citigroup on December 28, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

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

Citigroup  vs.  Pacific Funds Portfolio

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pacific Funds Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Funds Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Pacific Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Pacific Funds

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

The idea behind Citigroup and Pacific Funds Portfolio 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.