Correlation Between Citigroup and US Silica

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

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

Diversification Opportunities for Citigroup and US Silica

-0.33

Correlation Coefficient

Citigroup  US Silica

Very good diversification

The 3 months correlation between Citigroup and SLCA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and US Silica Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Silica Holdings 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 US Silica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Silica Holdings has no effect on the direction of Citigroup i.e., Citigroup and US Silica go up and down completely randomly.

Pair Corralation between Citigroup and US Silica

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.29 times more return on investment than US Silica. However, Citigroup is 3.46 times less risky than US Silica. It trades about 0.07 of its potential returns per unit of risk. US Silica Holdings is currently generating about -0.03 per unit of risk. If you would invest  4,168  in Citigroup on September 20, 2024 and sell it today you would earn a total of  2,674  from holding Citigroup or generate 64.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.24%
Values	Daily Returns

Citigroup  vs.  US Silica Holdings

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

US Silica Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Silica Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, US Silica is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and US Silica

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

The idea behind Citigroup and US Silica Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.