Correlation Between Citigroup and Riverfront Asset

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

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

Diversification Opportunities for Citigroup and Riverfront Asset

0.54

Correlation Coefficient

Citigroup  Riverfront Asset

Very weak diversification

The 3 months correlation between Citigroup and Riverfront is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Riverfront Asset Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riverfront Asset All 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 Riverfront Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riverfront Asset All has no effect on the direction of Citigroup i.e., Citigroup and Riverfront Asset go up and down completely randomly.

Pair Corralation between Citigroup and Riverfront Asset

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.29 times more return on investment than Riverfront Asset. However, Citigroup is 4.29 times more volatile than Riverfront Asset Allocation. It trades about 0.12 of its potential returns per unit of risk. Riverfront Asset Allocation is currently generating about 0.12 per unit of risk. If you would invest  6,092  in Citigroup on August 31, 2024 and sell it today you would earn a total of  924.00  from holding Citigroup or generate 15.17% return on investment over 90 days.

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

Citigroup  vs.  Riverfront Asset Allocation

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Riverfront Asset All

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Riverfront Asset Allocation are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Riverfront Asset 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 Riverfront Asset

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

The idea behind Citigroup and Riverfront Asset Allocation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.