Correlation Between Citigroup and Si Bone

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

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

Diversification Opportunities for Citigroup and Si Bone

-0.42

Correlation Coefficient

Citigroup  Si Bone

Very good diversification

The 3 months correlation between Citigroup and SIBN is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Si Bone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Si Bone 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 Si Bone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Si Bone has no effect on the direction of Citigroup i.e., Citigroup and Si Bone go up and down completely randomly.

Pair Corralation between Citigroup and Si Bone

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.51 times more return on investment than Si Bone. However, Citigroup is 1.97 times less risky than Si Bone. It trades about 0.13 of its potential returns per unit of risk. Si Bone is currently generating about -0.05 per unit of risk. If you would invest  6,092  in Citigroup on September 1, 2024 and sell it today you would earn a total of  995.00  from holding Citigroup or generate 16.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Si Bone

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.

Si Bone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Si Bone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Citigroup and Si Bone

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

The idea behind Citigroup and Si Bone 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.