Correlation Between Citigroup and Principal Lifetime

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

By analyzing existing cross correlation between Citigroup and Principal Lifetime 2040, you can compare the effects of market volatilities on Citigroup and Principal Lifetime 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 Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Principal Lifetime.

Diversification Opportunities for Citigroup and Principal Lifetime

0.03

Correlation Coefficient

Citigroup  Principal Lifetime

Significant diversification

The 3 months correlation between Citigroup and Principal is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Principal Lifetime 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime 2040 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 Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime 2040 has no effect on the direction of Citigroup i.e., Citigroup and Principal Lifetime go up and down completely randomly.

Pair Corralation between Citigroup and Principal Lifetime

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.32 times more return on investment than Principal Lifetime. However, Citigroup is 2.32 times more volatile than Principal Lifetime 2040. It trades about 0.06 of its potential returns per unit of risk. Principal Lifetime 2040 is currently generating about 0.04 per unit of risk. If you would invest  4,600  in Citigroup on October 4, 2024 and sell it today you would earn a total of  2,439  from holding Citigroup or generate 53.02% return on investment over 90 days.

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

Citigroup  vs.  Principal Lifetime 2040

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 unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Principal Lifetime 2040

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Lifetime 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Citigroup and Principal Lifetime

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

The idea behind Citigroup and Principal Lifetime 2040 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.