Correlation Between Citigroup and Spring Ventures

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

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

Diversification Opportunities for Citigroup and Spring Ventures

0.36

Correlation Coefficient

Citigroup  Spring Ventures

Weak diversification

The 3 months correlation between Citigroup and Spring is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Spring Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Ventures 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 Spring Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Ventures has no effect on the direction of Citigroup i.e., Citigroup and Spring Ventures go up and down completely randomly.

Pair Corralation between Citigroup and Spring Ventures

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.66 times more return on investment than Spring Ventures. However, Citigroup is 1.66 times more volatile than Spring Ventures. It trades about 0.01 of its potential returns per unit of risk. Spring Ventures is currently generating about 0.02 per unit of risk. If you would invest  6,991  in Citigroup on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

Citigroup  vs.  Spring Ventures

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Spring Ventures

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spring Ventures are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Spring Ventures 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 Spring Ventures

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

The idea behind Citigroup and Spring Ventures 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.