Correlation Between Citigroup and Maryland Tax-free

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

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

Diversification Opportunities for Citigroup and Maryland Tax-free

0.27

Correlation Coefficient

Citigroup  Maryland Tax-free

Modest diversification

The 3 months correlation between Citigroup and Maryland is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Maryland Tax Free Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maryland Tax Free 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 Maryland Tax-free. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maryland Tax Free has no effect on the direction of Citigroup i.e., Citigroup and Maryland Tax-free go up and down completely randomly.

Pair Corralation between Citigroup and Maryland Tax-free

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.3 times more return on investment than Maryland Tax-free. However, Citigroup is 8.3 times more volatile than Maryland Tax Free Bond. It trades about 0.01 of its potential returns per unit of risk. Maryland Tax Free Bond is currently generating about -0.04 per unit of risk. If you would invest  6,991  in Citigroup on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

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

Citigroup  vs.  Maryland Tax Free Bond

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Maryland Tax Free

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maryland Tax Free Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Maryland Tax-free 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 Maryland Tax-free

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

The idea behind Citigroup and Maryland Tax Free Bond 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.