Correlation Between Citigroup and Sleep Cycle

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

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

Diversification Opportunities for Citigroup and Sleep Cycle

-0.72

Correlation Coefficient

Citigroup  Sleep Cycle

Pay attention - limited upside

The 3 months correlation between Citigroup and Sleep is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sleep Cycle AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Cycle AB 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 Sleep Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Cycle AB has no effect on the direction of Citigroup i.e., Citigroup and Sleep Cycle go up and down completely randomly.

Pair Corralation between Citigroup and Sleep Cycle

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.66 times more return on investment than Sleep Cycle. However, Citigroup is 1.52 times less risky than Sleep Cycle. It trades about 0.06 of its potential returns per unit of risk. Sleep Cycle AB is currently generating about -0.18 per unit of risk. If you would invest  6,828  in Citigroup on September 21, 2024 and sell it today you would earn a total of  91.00  from holding Citigroup or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Sleep Cycle AB

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.

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Citigroup and Sleep Cycle

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

The idea behind Citigroup and Sleep Cycle AB 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.