Correlation Between Citigroup and Strattec Security

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

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

Diversification Opportunities for Citigroup and Strattec Security

0.53

Correlation Coefficient

Citigroup  Strattec Security

Very weak diversification

The 3 months correlation between Citigroup and Strattec is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Strattec Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strattec Security 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 Strattec Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strattec Security has no effect on the direction of Citigroup i.e., Citigroup and Strattec Security go up and down completely randomly.

Pair Corralation between Citigroup and Strattec Security

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.79 times more return on investment than Strattec Security. However, Citigroup is 1.26 times less risky than Strattec Security. It trades about 0.23 of its potential returns per unit of risk. Strattec Security is currently generating about 0.02 per unit of risk. If you would invest  6,255  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,744  from holding Citigroup or generate 27.88% return on investment over 90 days.

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

Citigroup  vs.  Strattec Security

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Strattec Security

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strattec Security are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Strattec Security is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Strattec Security

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

The idea behind Citigroup and Strattec Security 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.