Correlation Between Citigroup and Simplify Equity

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

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

Diversification Opportunities for Citigroup and Simplify Equity

0.46

Correlation Coefficient

Citigroup  Simplify Equity

Very weak diversification

The 3 months correlation between Citigroup and Simplify is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Citigroup i.e., Citigroup and Simplify Equity go up and down completely randomly.

Pair Corralation between Citigroup and Simplify Equity

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.71 times more return on investment than Simplify Equity. However, Citigroup is 1.41 times less risky than Simplify Equity. It trades about 0.13 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about -0.08 per unit of risk. If you would invest  6,863  in Citigroup on October 9, 2024 and sell it today you would earn a total of  411.00  from holding Citigroup or generate 5.99% return on investment over 90 days.

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

Citigroup  vs.  Simplify Equity PLUS

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Simplify Equity PLUS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Equity PLUS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Simplify Equity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Simplify Equity

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

The idea behind Citigroup and Simplify Equity PLUS 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.