Correlation Between Citigroup and Voya Financial

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

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

Diversification Opportunities for Citigroup and Voya Financial

-0.4

Correlation Coefficient

Citigroup  Voya Financial

Very good diversification

The 3 months correlation between Citigroup and Voya is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Voya Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Financial 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 Voya Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Financial has no effect on the direction of Citigroup i.e., Citigroup and Voya Financial go up and down completely randomly.

Pair Corralation between Citigroup and Voya Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.5 times more return on investment than Voya Financial. However, Citigroup is 1.5 times more volatile than Voya Financial. It trades about 0.07 of its potential returns per unit of risk. Voya Financial is currently generating about 0.04 per unit of risk. If you would invest  4,219  in Citigroup on September 23, 2024 and sell it today you would earn a total of  2,700  from holding Citigroup or generate 64.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Voya Financial

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

Voya Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and Voya Financial

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

The idea behind Citigroup and Voya Financial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.