Correlation Between Citigroup and SP Funds

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

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

Diversification Opportunities for Citigroup and SP Funds

-0.63

Correlation Coefficient

Citigroup  SP Funds

Excellent diversification

The 3 months correlation between Citigroup and SPSK is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SP Funds Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds Dow 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 SP Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds Dow has no effect on the direction of Citigroup i.e., Citigroup and SP Funds go up and down completely randomly.

Pair Corralation between Citigroup and SP Funds

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.98 times more return on investment than SP Funds. However, Citigroup is 4.98 times more volatile than SP Funds Dow. It trades about 0.15 of its potential returns per unit of risk. SP Funds Dow is currently generating about -0.04 per unit of risk. If you would invest  6,129  in Citigroup on September 21, 2024 and sell it today you would earn a total of  713.00  from holding Citigroup or generate 11.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Citigroup  vs.  SP Funds Dow

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SP Funds Dow

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Funds Dow has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SP Funds is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and SP Funds

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

The idea behind Citigroup and SP Funds Dow 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.