Correlation Between Citigroup and Tavistock Investments

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

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

Diversification Opportunities for Citigroup and Tavistock Investments

0.53

Correlation Coefficient

Citigroup  Tavistock Investments

Very weak diversification

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

Pair Corralation between Citigroup and Tavistock Investments

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.62 times more return on investment than Tavistock Investments. However, Citigroup is 1.61 times less risky than Tavistock Investments. It trades about 0.23 of its potential returns per unit of risk. Tavistock Investments Plc is currently generating about 0.05 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	98.36%
Values	Daily Returns

Citigroup  vs.  Tavistock Investments Plc

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.

Tavistock Investments Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tavistock Investments Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tavistock Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Tavistock Investments

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

The idea behind Citigroup and Tavistock Investments Plc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.