Correlation Between Citigroup and Supply Network

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

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

Diversification Opportunities for Citigroup and Supply Network

0.53

Correlation Coefficient

Citigroup  Supply Network

Very weak diversification

The 3 months correlation between Citigroup and Supply is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Supply Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supply Network 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 Supply Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supply Network has no effect on the direction of Citigroup i.e., Citigroup and Supply Network go up and down completely randomly.

Pair Corralation between Citigroup and Supply Network

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.96 times less return on investment than Supply Network. But when comparing it to its historical volatility, Citigroup is 1.05 times less risky than Supply Network. It trades about 0.07 of its potential returns per unit of risk. Supply Network is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,177  in Supply Network on September 28, 2024 and sell it today you would earn a total of  2,063  from holding Supply Network or generate 175.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Citigroup  vs.  Supply Network

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Supply Network

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Supply Network are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Supply Network may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Supply Network

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

The idea behind Citigroup and Supply Network 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..