Correlation Between Citigroup and 02005NBM1

Can any of the company-specific risk be diversified away by investing in both Citigroup and 02005NBM1 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 02005NBM1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and ALLY 47, you can compare the effects of market volatilities on Citigroup and 02005NBM1 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 02005NBM1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and 02005NBM1.

Diversification Opportunities for Citigroup and 02005NBM1

0.43

Correlation Coefficient

Citigroup  02005NBM1

Very weak diversification

The 3 months correlation between Citigroup and 02005NBM1 is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ALLY 47 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 02005NBM1 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 02005NBM1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 02005NBM1 has no effect on the direction of Citigroup i.e., Citigroup and 02005NBM1 go up and down completely randomly.

Pair Corralation between Citigroup and 02005NBM1

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.03 times less return on investment than 02005NBM1. But when comparing it to its historical volatility, Citigroup is 7.84 times less risky than 02005NBM1. It trades about 0.07 of its potential returns per unit of risk. ALLY 47 is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,164  in ALLY 47 on October 7, 2024 and sell it today you would lose (754.00) from holding ALLY 47 or give up 8.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.35%
Values	Daily Returns

Citigroup  vs.  ALLY 47

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 unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

02005NBM1

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALLY 47 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 02005NBM1 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and 02005NBM1

The main advantage of trading using opposite Citigroup and 02005NBM1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, 02005NBM1 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 02005NBM1 will offset losses from the drop in 02005NBM1's long position.

The idea behind Citigroup and ALLY 47 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.