Correlation Between Citigroup and Transphorm Technology

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

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

Diversification Opportunities for Citigroup and Transphorm Technology

-0.14

Correlation Coefficient

Citigroup  Transphorm Technology

Good diversification

The 3 months correlation between Citigroup and Transphorm is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Transphorm Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transphorm Technology 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 Transphorm Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transphorm Technology has no effect on the direction of Citigroup i.e., Citigroup and Transphorm Technology go up and down completely randomly.

Pair Corralation between Citigroup and Transphorm Technology

If you would invest  7,135  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,034  from holding Citigroup or generate 14.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.56%
Values	Daily Returns

Citigroup  vs.  Transphorm Technology

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.

Transphorm Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transphorm Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Transphorm Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Transphorm Technology

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

The idea behind Citigroup and Transphorm Technology 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.