Correlation Between Citigroup and Purpose Fund

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

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

Diversification Opportunities for Citigroup and Purpose Fund

-0.07

Correlation Coefficient

Citigroup  Purpose Fund

Good diversification

The 3 months correlation between Citigroup and Purpose is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Purpose Fund Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purpose Fund Corp 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 Purpose Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purpose Fund Corp has no effect on the direction of Citigroup i.e., Citigroup and Purpose Fund go up and down completely randomly.

Pair Corralation between Citigroup and Purpose Fund

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.65 times more return on investment than Purpose Fund. However, Citigroup is 4.65 times more volatile than Purpose Fund Corp. It trades about 0.13 of its potential returns per unit of risk. Purpose Fund Corp is currently generating about -0.05 per unit of risk. If you would invest  5,985  in Citigroup on September 25, 2024 and sell it today you would earn a total of  934.00  from holding Citigroup or generate 15.61% return on investment over 90 days.

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

Citigroup  vs.  Purpose Fund Corp

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Purpose Fund Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Purpose Fund Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Purpose Fund is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Purpose Fund

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

The idea behind Citigroup and Purpose Fund Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.