Correlation Between Citigroup and RELIANCE

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

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

Diversification Opportunities for Citigroup and RELIANCE

0.18

Correlation Coefficient

Citigroup  RELIANCE

Average diversification

The 3 months correlation between Citigroup and RELIANCE is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and RELIANCE STL ALUM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STL ALUM 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 RELIANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STL ALUM has no effect on the direction of Citigroup i.e., Citigroup and RELIANCE go up and down completely randomly.

Pair Corralation between Citigroup and RELIANCE

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.55 times more return on investment than RELIANCE. However, Citigroup is 1.82 times less risky than RELIANCE. It trades about 0.01 of its potential returns per unit of risk. RELIANCE STL ALUM is currently generating about -0.37 per unit of risk. If you would invest  7,087  in Citigroup on September 29, 2024 and sell it today you would earn a total of  13.00  from holding Citigroup or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	20.0%
Values	Daily Returns

Citigroup  vs.  RELIANCE STL ALUM

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.

RELIANCE STL ALUM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STL ALUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for RELIANCE STL ALUM investors.

Pair Trading with Citigroup and RELIANCE

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

The idea behind Citigroup and RELIANCE STL ALUM 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.