Correlation Between Citigroup and Automatic Bank

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

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

Diversification Opportunities for Citigroup and Automatic Bank

0.08

Correlation Coefficient

Citigroup  Automatic Bank

Significant diversification

The 3 months correlation between Citigroup and Automatic is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Automatic Bank Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Bank Services 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 Automatic Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Bank Services has no effect on the direction of Citigroup i.e., Citigroup and Automatic Bank go up and down completely randomly.

Pair Corralation between Citigroup and Automatic Bank

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.48 times less return on investment than Automatic Bank. But when comparing it to its historical volatility, Citigroup is 1.21 times less risky than Automatic Bank. It trades about 0.01 of its potential returns per unit of risk. Automatic Bank Services is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  234,200  in Automatic Bank Services on December 30, 2024 and sell it today you would earn a total of  36,600  from holding Automatic Bank Services or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

Citigroup  vs.  Automatic Bank Services

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Automatic Bank Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Bank Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Automatic Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Automatic Bank

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

The idea behind Citigroup and Automatic Bank Services 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.