Correlation Between Citigroup and Ultra Short

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

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

Diversification Opportunities for Citigroup and Ultra Short

0.84

Correlation Coefficient

Citigroup  Ultra Short

Very poor diversification

The 3 months correlation between Citigroup and Ultra is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ultra Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Short Term 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 Ultra Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Short Term has no effect on the direction of Citigroup i.e., Citigroup and Ultra Short go up and down completely randomly.

Pair Corralation between Citigroup and Ultra Short

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Ultra Short. In addition to that, Citigroup is 20.59 times more volatile than Ultra Short Term Bond. It trades about -0.03 of its total potential returns per unit of risk. Ultra Short Term Bond is currently generating about 0.08 per unit of volatility. If you would invest  1,007  in Ultra Short Term Bond on September 23, 2024 and sell it today you would earn a total of  1.00  from holding Ultra Short Term Bond or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Ultra Short Term Bond

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ultra Short Term

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short 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 Ultra Short

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

The idea behind Citigroup and Ultra Short Term Bond 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.