Correlation Between Citigroup and Payden Floating

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

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

Diversification Opportunities for Citigroup and Payden Floating

0.86

Correlation Coefficient

Citigroup  Payden Floating

Very poor diversification

The 3 months correlation between Citigroup and Payden is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Payden Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Floating Rate 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 Payden Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Floating Rate has no effect on the direction of Citigroup i.e., Citigroup and Payden Floating go up and down completely randomly.

Pair Corralation between Citigroup and Payden Floating

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.46 times more return on investment than Payden Floating. However, Citigroup is 8.46 times more volatile than Payden Floating Rate. It trades about 0.02 of its potential returns per unit of risk. Payden Floating Rate is currently generating about -0.07 per unit of risk. If you would invest  7,075  in Citigroup on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Citigroup or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Payden Floating Rate

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Payden Floating Rate

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Floating Rate are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Payden Floating 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 Payden Floating

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

The idea behind Citigroup and Payden Floating Rate 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.