Correlation Between Citigroup and Shopify

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

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

Diversification Opportunities for Citigroup and Shopify

0.91

Correlation Coefficient

Citigroup  Shopify

Almost no diversification

The 3 months correlation between Citigroup and Shopify is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Citigroup i.e., Citigroup and Shopify go up and down completely randomly.

Pair Corralation between Citigroup and Shopify

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.33 times less return on investment than Shopify. But when comparing it to its historical volatility, Citigroup is 1.72 times less risky than Shopify. It trades about 0.13 of its potential returns per unit of risk. Shopify is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,658  in Shopify on August 31, 2024 and sell it today you would earn a total of  6,169  from holding Shopify or generate 63.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.88%
Values	Daily Returns

Citigroup  vs.  Shopify

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Shopify

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Shopify displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Shopify

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

The idea behind Citigroup and Shopify 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.