Correlation Between Citigroup and Tembo Global

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

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

Diversification Opportunities for Citigroup and Tembo Global

0.67

Correlation Coefficient

Citigroup  Tembo Global

Poor diversification

The 3 months correlation between Citigroup and Tembo is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tembo Global Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tembo Global Industries 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 Tembo Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tembo Global Industries has no effect on the direction of Citigroup i.e., Citigroup and Tembo Global go up and down completely randomly.

Pair Corralation between Citigroup and Tembo Global

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.46 times more return on investment than Tembo Global. However, Citigroup is 2.19 times less risky than Tembo Global. It trades about 0.38 of its potential returns per unit of risk. Tembo Global Industries is currently generating about -0.2 per unit of risk. If you would invest  7,135  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,013  from holding Citigroup or generate 14.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Citigroup  vs.  Tembo Global Industries

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Tembo Global Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tembo Global Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Tembo Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Tembo Global

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

The idea behind Citigroup and Tembo Global Industries 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.