Correlation Between Citigroup and TQM Public

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

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

Diversification Opportunities for Citigroup and TQM Public

-0.61

Correlation Coefficient

Citigroup  TQM Public

Excellent diversification

The 3 months correlation between Citigroup and TQM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and TQM Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TQM Public 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 TQM Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TQM Public has no effect on the direction of Citigroup i.e., Citigroup and TQM Public go up and down completely randomly.

Pair Corralation between Citigroup and TQM Public

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the TQM Public. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.71 times less risky than TQM Public. The stock trades about -0.09 of its potential returns per unit of risk. The TQM Public is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,270  in TQM Public on September 24, 2024 and sell it today you would earn a total of  10.00  from holding TQM Public or generate 0.44% return on investment over 90 days.

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

Citigroup  vs.  TQM Public

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

TQM Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TQM Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Citigroup and TQM Public

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

The idea behind Citigroup and TQM Public 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.