Correlation Between Citigroup and Shotspotter

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

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

Diversification Opportunities for Citigroup and Shotspotter

0.61

Correlation Coefficient

Citigroup  Shotspotter

Poor diversification

The 3 months correlation between Citigroup and Shotspotter is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shotspotter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shotspotter 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 Shotspotter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shotspotter has no effect on the direction of Citigroup i.e., Citigroup and Shotspotter go up and down completely randomly.

Pair Corralation between Citigroup and Shotspotter

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.3 times less return on investment than Shotspotter. But when comparing it to its historical volatility, Citigroup is 2.76 times less risky than Shotspotter. It trades about 0.13 of its potential returns per unit of risk. Shotspotter is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,298  in Shotspotter on November 29, 2024 and sell it today you would earn a total of  328.00  from holding Shotspotter or generate 25.27% return on investment over 90 days.

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

Citigroup  vs.  Shotspotter

Citigroup

Risk-Adjusted Performance

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Shotspotter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shotspotter are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Shotspotter demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Shotspotter

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

The idea behind Citigroup and Shotspotter 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 Stocks Directory module to find actively traded stocks across global markets.