Correlation Between Citigroup and Rackla Metals

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

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

Diversification Opportunities for Citigroup and Rackla Metals

-0.1

Correlation Coefficient

Citigroup  Rackla Metals

Good diversification

The 3 months correlation between Citigroup and Rackla is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Rackla Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rackla Metals 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 Rackla Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rackla Metals has no effect on the direction of Citigroup i.e., Citigroup and Rackla Metals go up and down completely randomly.

Pair Corralation between Citigroup and Rackla Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 21.6 times less return on investment than Rackla Metals. But when comparing it to its historical volatility, Citigroup is 3.88 times less risky than Rackla Metals. It trades about 0.03 of its potential returns per unit of risk. Rackla Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Rackla Metals on December 29, 2024 and sell it today you would earn a total of  11.00  from holding Rackla Metals or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Rackla Metals

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.

Rackla Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rackla Metals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Rackla Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Rackla Metals

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

The idea behind Citigroup and Rackla Metals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.