Correlation Between Citigroup and Visible Gold

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

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

Diversification Opportunities for Citigroup and Visible Gold

0.2

Correlation Coefficient

Citigroup  Visible Gold

Modest diversification

The 3 months correlation between Citigroup and Visible is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Visible Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visible Gold Mines 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 Visible Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visible Gold Mines has no effect on the direction of Citigroup i.e., Citigroup and Visible Gold go up and down completely randomly.

Pair Corralation between Citigroup and Visible Gold

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times less return on investment than Visible Gold. But when comparing it to its historical volatility, Citigroup is 3.9 times less risky than Visible Gold. It trades about 0.18 of its potential returns per unit of risk. Visible Gold Mines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Visible Gold Mines on September 15, 2024 and sell it today you would earn a total of  1.00  from holding Visible Gold Mines or generate 14.29% 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.  Visible Gold Mines

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Visible Gold Mines

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Visible Gold Mines are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Visible Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Visible Gold

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

The idea behind Citigroup and Visible Gold Mines 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.