Correlation Between Citigroup and Tonogold Resources

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

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

Diversification Opportunities for Citigroup and Tonogold Resources

-0.25

Correlation Coefficient

Citigroup  Tonogold Resources

Very good diversification

The 3 months correlation between Citigroup and Tonogold is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tonogold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tonogold Resources 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 Tonogold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tonogold Resources has no effect on the direction of Citigroup i.e., Citigroup and Tonogold Resources go up and down completely randomly.

Pair Corralation between Citigroup and Tonogold Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.42 times less return on investment than Tonogold Resources. But when comparing it to its historical volatility, Citigroup is 9.03 times less risky than Tonogold Resources. It trades about 0.25 of its potential returns per unit of risk. Tonogold Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.86  in Tonogold Resources on October 26, 2024 and sell it today you would lose (0.56) from holding Tonogold Resources or give up 30.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  Tonogold Resources

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.

Tonogold Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tonogold Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Tonogold Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Tonogold Resources

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

The idea behind Citigroup and Tonogold Resources 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 Anywhere module to track or share privately all of your investments from the convenience of any device.