Correlation Between Citigroup and Square

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

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

Diversification Opportunities for Citigroup and Square

0.94

Correlation Coefficient

Citigroup  Square

Almost no diversification

The 3 months correlation between Citigroup and Square is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Square Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Square Inc 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 Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Square Inc has no effect on the direction of Citigroup i.e., Citigroup and Square go up and down completely randomly.

Pair Corralation between Citigroup and Square

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.95 times less return on investment than Square. But when comparing it to its historical volatility, Citigroup is 1.65 times less risky than Square. It trades about 0.1 of its potential returns per unit of risk. Square Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,081  in Square Inc on September 22, 2024 and sell it today you would earn a total of  2,372  from holding Square Inc or generate 39.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  Square Inc

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.

Square Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Square Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Square reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Square

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

The idea behind Citigroup and Square Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.