Correlation Between Citigroup and SLM Corp

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

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

Diversification Opportunities for Citigroup and SLM Corp

0.07

Correlation Coefficient

Citigroup  SLM Corp

Significant diversification

The 3 months correlation between Citigroup and SLM is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SLM Corp Pb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp Pb 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp Pb has no effect on the direction of Citigroup i.e., Citigroup and SLM Corp go up and down completely randomly.

Pair Corralation between Citigroup and SLM Corp

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.11 times less return on investment than SLM Corp. In addition to that, Citigroup is 4.98 times more volatile than SLM Corp Pb. It trades about 0.03 of its total potential returns per unit of risk. SLM Corp Pb is currently generating about 0.18 per unit of volatility. If you would invest  7,250  in SLM Corp Pb on December 28, 2024 and sell it today you would earn a total of  319.00  from holding SLM Corp Pb or generate 4.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  SLM Corp Pb

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

SLM Corp Pb

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp Pb are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and SLM Corp

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

The idea behind Citigroup and SLM Corp Pb 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.