Correlation Between Citigroup and Sp Smallcap

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

By analyzing existing cross correlation between Citigroup and Sp Smallcap 600, you can compare the effects of market volatilities on Citigroup and Sp Smallcap 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 Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Sp Smallcap.

Diversification Opportunities for Citigroup and Sp Smallcap

0.5

Correlation Coefficient

Citigroup  Sp Smallcap

Very weak diversification

The 3 months correlation between Citigroup and RYYCX is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Citigroup i.e., Citigroup and Sp Smallcap go up and down completely randomly.

Pair Corralation between Citigroup and Sp Smallcap

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.13 times more return on investment than Sp Smallcap. However, Citigroup is 1.13 times more volatile than Sp Smallcap 600. It trades about 0.07 of its potential returns per unit of risk. Sp Smallcap 600 is currently generating about 0.01 per unit of risk. If you would invest  4,812  in Citigroup on October 24, 2024 and sell it today you would earn a total of  3,391  from holding Citigroup or generate 70.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  Sp Smallcap 600

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Sp Smallcap 600

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap 600 are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Sp Smallcap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Sp Smallcap

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

The idea behind Citigroup and Sp Smallcap 600 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.