Correlation Between Citigroup and Western Acquisition

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

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

Diversification Opportunities for Citigroup and Western Acquisition

0.7

Correlation Coefficient

Citigroup  Western Acquisition

Poor diversification

The 3 months correlation between Citigroup and Western is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Citigroup i.e., Citigroup and Western Acquisition go up and down completely randomly.

Pair Corralation between Citigroup and Western Acquisition

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.86 times more return on investment than Western Acquisition. However, Citigroup is 2.86 times more volatile than Western Acquisition Ventures. It trades about 0.17 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.16 per unit of risk. If you would invest  5,877  in Citigroup on September 17, 2024 and sell it today you would earn a total of  1,224  from holding Citigroup or generate 20.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Western Acquisition Ventures

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.

Western Acquisition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Western Acquisition

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

The idea behind Citigroup and Western Acquisition Ventures 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.