Correlation Between Citigroup and Government Long

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

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

Diversification Opportunities for Citigroup and Government Long

-0.07

Correlation Coefficient

Citigroup  Government Long

Good diversification

The 3 months correlation between Citigroup and Government is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Government Long Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Long Bond 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 Government Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Long Bond has no effect on the direction of Citigroup i.e., Citigroup and Government Long go up and down completely randomly.

Pair Corralation between Citigroup and Government Long

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.77 times less return on investment than Government Long. In addition to that, Citigroup is 2.09 times more volatile than Government Long Bond. It trades about 0.01 of its total potential returns per unit of risk. Government Long Bond is currently generating about 0.09 per unit of volatility. If you would invest  10,304  in Government Long Bond on December 30, 2024 and sell it today you would earn a total of  504.00  from holding Government Long Bond or generate 4.89% return on investment over 90 days.

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

Citigroup  vs.  Government Long Bond

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Government Long Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Government Long Bond are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Government Long 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 Government Long

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

The idea behind Citigroup and Government Long Bond 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.