Correlation Between Citigroup and Government Securities

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

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

Diversification Opportunities for Citigroup and Government Securities

0.23

Correlation Coefficient

Citigroup  Government Securities

Modest diversification

The 3 months correlation between Citigroup and Government is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities 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 Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Citigroup i.e., Citigroup and Government Securities go up and down completely randomly.

Pair Corralation between Citigroup and Government Securities

If you would invest  7,100  in Citigroup on October 25, 2024 and sell it today you would earn a total of  1,098  from holding Citigroup or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

Citigroup  vs.  Government Securities Fund

Citigroup

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 21 (%) 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.

Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Government Securities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Government Securities 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 Government Securities

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

The idea behind Citigroup and Government Securities Fund 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.