Correlation Between Citigroup and American High

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

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

Diversification Opportunities for Citigroup and American High

0.84

Correlation Coefficient

Citigroup  American High

Very poor diversification

The 3 months correlation between Citigroup and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and American High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Income 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 American High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of Citigroup i.e., Citigroup and American High go up and down completely randomly.

Pair Corralation between Citigroup and American High

Taking into account the 90-day investment horizon Citigroup is expected to generate 11.41 times more return on investment than American High. However, Citigroup is 11.41 times more volatile than American High Income. It trades about 0.18 of its potential returns per unit of risk. American High Income is currently generating about 0.17 per unit of risk. If you would invest  5,788  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

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

Citigroup  vs.  American High Income

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

American High Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American High Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, American High 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 American High

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

The idea behind Citigroup and American High Income 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.