Correlation Between Citigroup and Transcontinental

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

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

Diversification Opportunities for Citigroup and Transcontinental

0.0

Correlation Coefficient

Citigroup  Transcontinental

Pay attention - limited upside

The 3 months correlation between Citigroup and Transcontinental is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Citigroup i.e., Citigroup and Transcontinental go up and down completely randomly.

Pair Corralation between Citigroup and Transcontinental

Taking into account the 90-day investment horizon Citigroup is expected to generate 11.34 times less return on investment than Transcontinental. But when comparing it to its historical volatility, Citigroup is 1.29 times less risky than Transcontinental. It trades about 0.02 of its potential returns per unit of risk. Transcontinental is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Transcontinental on September 22, 2024 and sell it today you would earn a total of  100.00  from holding Transcontinental or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Transcontinental

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.

Transcontinental

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Transcontinental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Transcontinental

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

The idea behind Citigroup and Transcontinental 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .