Correlation Between Citigroup and Western Alaska

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

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

Diversification Opportunities for Citigroup and Western Alaska

-0.38

Correlation Coefficient

Citigroup  Western Alaska

Very good diversification

The 3 months correlation between Citigroup and Western is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Western Alaska Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Alaska Minerals 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 Western Alaska. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Alaska Minerals has no effect on the direction of Citigroup i.e., Citigroup and Western Alaska go up and down completely randomly.

Pair Corralation between Citigroup and Western Alaska

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.26 times more return on investment than Western Alaska. However, Citigroup is 3.87 times less risky than Western Alaska. It trades about 0.12 of its potential returns per unit of risk. Western Alaska Minerals is currently generating about -0.01 per unit of risk. If you would invest  6,092  in Citigroup on August 31, 2024 and sell it today you would earn a total of  924.00  from holding Citigroup or generate 15.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Western Alaska Minerals

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

Western Alaska Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Alaska Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Western Alaska is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Western Alaska

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

The idea behind Citigroup and Western Alaska Minerals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.