Correlation Between Citigroup and Quartz Mountain

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

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

Diversification Opportunities for Citigroup and Quartz Mountain

0.04

Correlation Coefficient

Citigroup  Quartz Mountain

Significant diversification

The 3 months correlation between Citigroup and Quartz is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Quartz Mountain Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quartz Mountain Resources 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 Quartz Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quartz Mountain Resources has no effect on the direction of Citigroup i.e., Citigroup and Quartz Mountain go up and down completely randomly.

Pair Corralation between Citigroup and Quartz Mountain

Taking into account the 90-day investment horizon Citigroup is expected to generate 15.36 times less return on investment than Quartz Mountain. But when comparing it to its historical volatility, Citigroup is 3.54 times less risky than Quartz Mountain. It trades about 0.03 of its potential returns per unit of risk. Quartz Mountain Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Quartz Mountain Resources on December 28, 2024 and sell it today you would earn a total of  23.00  from holding Quartz Mountain Resources or generate 60.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  Quartz Mountain Resources

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Quartz Mountain Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Quartz Mountain Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Quartz Mountain showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Quartz Mountain

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

The idea behind Citigroup and Quartz Mountain Resources 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.