Correlation Between Citigroup and Small Company

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

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

Diversification Opportunities for Citigroup and Small Company

-0.35

Correlation Coefficient

Citigroup  Small Company

Very good diversification

The 3 months correlation between Citigroup and Small is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value 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 Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Citigroup i.e., Citigroup and Small Company go up and down completely randomly.

Pair Corralation between Citigroup and Small Company

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.46 times more return on investment than Small Company. However, Citigroup is 1.46 times more volatile than Small Pany Value. It trades about 0.03 of its potential returns per unit of risk. Small Pany Value is currently generating about -0.23 per unit of risk. If you would invest  7,101  in Citigroup on December 4, 2024 and sell it today you would earn a total of  134.00  from holding Citigroup or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  Small Pany Value

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Small Pany Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Citigroup and Small Company

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

The idea behind Citigroup and Small Pany Value 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 Transaction History module to view history of all your transactions and understand their impact on performance.