Correlation Between Citigroup and Hennessy Stance

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

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

Diversification Opportunities for Citigroup and Hennessy Stance

0.26

Correlation Coefficient

Citigroup  Hennessy Stance

Modest diversification

The 3 months correlation between Citigroup and Hennessy is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hennessy Stance ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Stance ESG 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 Hennessy Stance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Stance ESG has no effect on the direction of Citigroup i.e., Citigroup and Hennessy Stance go up and down completely randomly.

Pair Corralation between Citigroup and Hennessy Stance

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.17 times more return on investment than Hennessy Stance. However, Citigroup is 2.17 times more volatile than Hennessy Stance ESG. It trades about 0.07 of its potential returns per unit of risk. Hennessy Stance ESG is currently generating about -0.24 per unit of risk. If you would invest  7,196  in Citigroup on October 12, 2024 and sell it today you would earn a total of  130.00  from holding Citigroup or generate 1.81% return on investment over 90 days.

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

Citigroup  vs.  Hennessy Stance ESG

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hennessy Stance ESG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and Hennessy Stance

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

The idea behind Citigroup and Hennessy Stance ESG 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.