Correlation Between Citigroup and Sigiriya Village

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

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

Diversification Opportunities for Citigroup and Sigiriya Village

0.79

Correlation Coefficient

Citigroup  Sigiriya Village

Poor diversification

The 3 months correlation between Citigroup and Sigiriya is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sigiriya Village Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sigiriya Village Hotels 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 Sigiriya Village. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sigiriya Village Hotels has no effect on the direction of Citigroup i.e., Citigroup and Sigiriya Village go up and down completely randomly.

Pair Corralation between Citigroup and Sigiriya Village

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.56 times more return on investment than Sigiriya Village. However, Citigroup is 1.78 times less risky than Sigiriya Village. It trades about 0.08 of its potential returns per unit of risk. Sigiriya Village Hotels is currently generating about 0.03 per unit of risk. If you would invest  4,091  in Citigroup on September 14, 2024 and sell it today you would earn a total of  3,105  from holding Citigroup or generate 75.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	78.95%
Values	Daily Returns

Citigroup  vs.  Sigiriya Village Hotels

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sigiriya Village Hotels

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Sigiriya Village Hotels are ranked lower than 36 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sigiriya Village sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Sigiriya Village

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

The idea behind Citigroup and Sigiriya Village Hotels 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.