Correlation Between Citigroup and Aqr Managed

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

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

Diversification Opportunities for Citigroup and Aqr Managed

0.78

Correlation Coefficient

Citigroup  Aqr Managed

Poor diversification

The 3 months correlation between Citigroup and Aqr is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Aqr Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Managed Futures 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 Aqr Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Managed Futures has no effect on the direction of Citigroup i.e., Citigroup and Aqr Managed go up and down completely randomly.

Pair Corralation between Citigroup and Aqr Managed

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.13 times more return on investment than Aqr Managed. However, Citigroup is 3.13 times more volatile than Aqr Managed Futures. It trades about 0.4 of its potential returns per unit of risk. Aqr Managed Futures is currently generating about 0.17 per unit of risk. If you would invest  6,977  in Citigroup on October 22, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Citigroup  vs.  Aqr Managed Futures

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aqr Managed Futures

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Managed Futures are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Aqr Managed may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Aqr Managed

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

The idea behind Citigroup and Aqr Managed Futures 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.