Correlation Between Citigroup and Strategic Metals

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

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

Diversification Opportunities for Citigroup and Strategic Metals

0.19

Correlation Coefficient

Citigroup  Strategic Metals

Average diversification

The 3 months correlation between Citigroup and Strategic is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Strategic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Metals 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 Strategic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Metals has no effect on the direction of Citigroup i.e., Citigroup and Strategic Metals go up and down completely randomly.

Pair Corralation between Citigroup and Strategic Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.72 times less return on investment than Strategic Metals. But when comparing it to its historical volatility, Citigroup is 2.76 times less risky than Strategic Metals. It trades about 0.04 of its potential returns per unit of risk. Strategic Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Strategic Metals on December 22, 2024 and sell it today you would earn a total of  4.00  from holding Strategic Metals or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  Strategic Metals

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Strategic Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Strategic Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Strategic Metals

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

The idea behind Citigroup and Strategic Metals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.