Correlation Between Citigroup and Steward Covered

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

Diversification Opportunities for Citigroup and Steward Covered

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Citigroup and Steward is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Steward Ered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Ered Call 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 Covered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Ered Call has no effect on the direction of Citigroup i.e., Citigroup and Steward Covered go up and down completely randomly.

Pair Corralation between Citigroup and Steward Covered

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.46 times more return on investment than Steward Covered. However, Citigroup is 4.46 times more volatile than Steward Ered Call. It trades about 0.17 of its potential returns per unit of risk. Steward Ered Call is currently generating about 0.25 per unit of risk. If you would invest  5,857  in Citigroup on September 6, 2024 and sell it today you would earn a total of  1,293  from holding Citigroup or generate 22.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Steward Ered Call

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Steward Ered Call 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Steward Ered Call are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Steward Covered may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Citigroup and Steward Covered Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Steward Covered

The main advantage of trading using opposite Citigroup and Steward Covered positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Steward Covered 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 Covered will offset losses from the drop in Steward Covered's long position.
The idea behind Citigroup and Steward Ered Call 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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