Correlation Between Citigroup and Starbucks CDR

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

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

Diversification Opportunities for Citigroup and Starbucks CDR

-0.13

Correlation Coefficient

Citigroup  Starbucks CDR

Good diversification

The 3 months correlation between Citigroup and Starbucks is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Starbucks CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks CDR 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 Starbucks CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks CDR has no effect on the direction of Citigroup i.e., Citigroup and Starbucks CDR go up and down completely randomly.

Pair Corralation between Citigroup and Starbucks CDR

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.09 times more return on investment than Starbucks CDR. However, Citigroup is 1.09 times more volatile than Starbucks CDR. It trades about 0.24 of its potential returns per unit of risk. Starbucks CDR is currently generating about -0.08 per unit of risk. If you would invest  6,895  in Citigroup on October 22, 2024 and sell it today you would earn a total of  1,104  from holding Citigroup or generate 16.01% return on investment over 90 days.

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

Citigroup  vs.  Starbucks CDR

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) 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.

Starbucks CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbucks CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Starbucks CDR is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Starbucks CDR

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

The idea behind Citigroup and Starbucks CDR 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.