Correlation Between Citigroup and Steward Small-mid

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Steward Small-mid 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 Steward Small-mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Steward Small Mid Cap, you can compare the effects of market volatilities on Citigroup and Steward Small-mid 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 Steward Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Steward Small-mid.

Diversification Opportunities for Citigroup and Steward Small-mid

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Citigroup and Steward is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Steward Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Small Mid 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 Steward Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Small Mid has no effect on the direction of Citigroup i.e., Citigroup and Steward Small-mid go up and down completely randomly.

Pair Corralation between Citigroup and Steward Small-mid

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.65 times more return on investment than Steward Small-mid. However, Citigroup is 1.65 times more volatile than Steward Small Mid Cap. It trades about 0.08 of its potential returns per unit of risk. Steward Small Mid Cap is currently generating about 0.11 per unit of risk. If you would invest  6,065  in Citigroup on September 5, 2024 and sell it today you would earn a total of  1,085  from holding Citigroup or generate 17.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Steward Small Mid Cap

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.
Steward Small Mid 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Steward Small Mid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Small-mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citigroup and Steward Small-mid Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Steward Small-mid

The main advantage of trading using opposite Citigroup and Steward Small-mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Steward Small-mid 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 Steward Small-mid will offset losses from the drop in Steward Small-mid's long position.
The idea behind Citigroup and Steward Small Mid Cap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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