Correlation Between Citigroup and Sandfire Resources

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

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

Diversification Opportunities for Citigroup and Sandfire Resources

0.04

Correlation Coefficient

Citigroup  Sandfire Resources

Significant diversification

The 3 months correlation between Citigroup and Sandfire is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sandfire Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandfire Resources 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 Sandfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandfire Resources has no effect on the direction of Citigroup i.e., Citigroup and Sandfire Resources go up and down completely randomly.

Pair Corralation between Citigroup and Sandfire Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.39 times more return on investment than Sandfire Resources. However, Citigroup is 2.57 times less risky than Sandfire Resources. It trades about 0.19 of its potential returns per unit of risk. Sandfire Resources Limited is currently generating about -0.16 per unit of risk. If you would invest  6,900  in Citigroup on September 19, 2024 and sell it today you would earn a total of  212.00  from holding Citigroup or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Sandfire Resources Limited

Citigroup

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Sandfire Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sandfire Resources Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sandfire Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Sandfire Resources

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

The idea behind Citigroup and Sandfire Resources Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.