Correlation Between Citigroup and Rayonier Advanced

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

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

Diversification Opportunities for Citigroup and Rayonier Advanced

0.25

Correlation Coefficient

Citigroup  Rayonier Advanced

Modest diversification

The 3 months correlation between Citigroup and Rayonier is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Rayonier Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier Advanced 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 Rayonier Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier Advanced has no effect on the direction of Citigroup i.e., Citigroup and Rayonier Advanced go up and down completely randomly.

Pair Corralation between Citigroup and Rayonier Advanced

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.43 times less return on investment than Rayonier Advanced. But when comparing it to its historical volatility, Citigroup is 2.23 times less risky than Rayonier Advanced. It trades about 0.08 of its potential returns per unit of risk. Rayonier Advanced Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  533.00  in Rayonier Advanced Materials on September 25, 2024 and sell it today you would earn a total of  218.00  from holding Rayonier Advanced Materials or generate 40.9% return on investment over 90 days.

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

Citigroup  vs.  Rayonier Advanced Materials

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Citigroup and Rayonier Advanced

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

The idea behind Citigroup and Rayonier Advanced Materials 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.