Correlation Between Citigroup and Target Retirement

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

By analyzing existing cross correlation between Citigroup and Target Retirement 2040, you can compare the effects of market volatilities on Citigroup and Target Retirement 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 Target Retirement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Target Retirement.

Diversification Opportunities for Citigroup and Target Retirement

0.21

Correlation Coefficient

Citigroup  Target Retirement

Modest diversification

The 3 months correlation between Citigroup and Target is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Target Retirement 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Retirement 2040 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 Target Retirement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Retirement 2040 has no effect on the direction of Citigroup i.e., Citigroup and Target Retirement go up and down completely randomly.

Pair Corralation between Citigroup and Target Retirement

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.38 times more return on investment than Target Retirement. However, Citigroup is 2.38 times more volatile than Target Retirement 2040. It trades about 0.12 of its potential returns per unit of risk. Target Retirement 2040 is currently generating about -0.03 per unit of risk. If you would invest  7,038  in Citigroup on November 28, 2024 and sell it today you would earn a total of  776.00  from holding Citigroup or generate 11.03% 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.  Target Retirement 2040

Citigroup

Risk-Adjusted Performance

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 unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Target Retirement 2040

Risk-Adjusted Performance

Very Weak

Over the last 90 days Target Retirement 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Target Retirement 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 Target Retirement

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

The idea behind Citigroup and Target Retirement 2040 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 Commodity Directory module to find actively traded commodities issued by global exchanges.