Correlation Between Citigroup and Schwab Value

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

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

Diversification Opportunities for Citigroup and Schwab Value

0.86

Correlation Coefficient

Citigroup  Schwab Value

Very poor diversification

The 3 months correlation between Citigroup and Schwab is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Schwab Value Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Value Advantage 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 Schwab Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Value Advantage has no effect on the direction of Citigroup i.e., Citigroup and Schwab Value go up and down completely randomly.

Pair Corralation between Citigroup and Schwab Value

If you would invest  6,828  in Citigroup on September 21, 2024 and sell it today you would earn a total of  91.00  from holding Citigroup or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Schwab Value Advantage

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.

Schwab Value Advantage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Value Advantage are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Schwab Value

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

The idea behind Citigroup and Schwab Value Advantage 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.