Correlation Between Citigroup and Columbia Select

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

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

Diversification Opportunities for Citigroup and Columbia Select

0.74

Correlation Coefficient

Citigroup  Columbia Select

Poor diversification

The 3 months correlation between Citigroup and Columbia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Columbia Select Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large 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 Columbia Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Large has no effect on the direction of Citigroup i.e., Citigroup and Columbia Select go up and down completely randomly.

Pair Corralation between Citigroup and Columbia Select

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.47 times more return on investment than Columbia Select. However, Citigroup is 2.47 times more volatile than Columbia Select Large Cap. It trades about 0.2 of its potential returns per unit of risk. Columbia Select Large Cap is currently generating about 0.02 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,480  from holding Citigroup or generate 25.89% return on investment over 90 days.

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

Citigroup  vs.  Columbia Select Large Cap

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Columbia Select Large

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Select Large Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Columbia Select

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

The idea behind Citigroup and Columbia Select Large Cap 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 Valuation module to check real value of public entities based on technical and fundamental data.