Correlation Between Citigroup and SBF 120

Can any of the company-specific risk be diversified away by investing in both Citigroup and SBF 120 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 SBF 120 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and SBF 120 Gross, you can compare the effects of market volatilities on Citigroup and SBF 120 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 SBF 120. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and SBF 120.

Diversification Opportunities for Citigroup and SBF 120

-0.66

Correlation Coefficient

Citigroup  SBF 120

Excellent diversification

The 3 months correlation between Citigroup and SBF is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SBF 120 Gross in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBF 120 Gross 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 SBF 120. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBF 120 Gross has no effect on the direction of Citigroup i.e., Citigroup and SBF 120 go up and down completely randomly.

Pair Corralation between Citigroup and SBF 120

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.11 times more return on investment than SBF 120. However, Citigroup is 2.11 times more volatile than SBF 120 Gross. It trades about 0.2 of its potential returns per unit of risk. SBF 120 Gross is currently generating about 0.0 per unit of risk. If you would invest  5,683  in Citigroup on September 12, 2024 and sell it today you would earn a total of  1,513  from holding Citigroup or generate 26.62% return on investment over 90 days.

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

Citigroup  vs.  SBF 120 Gross

Pair Trading with Citigroup and SBF 120

The main advantage of trading using opposite Citigroup and SBF 120 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, SBF 120 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 SBF 120 will offset losses from the drop in SBF 120's long position.

The idea behind Citigroup and SBF 120 Gross 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.