Correlation Between Citigroup and WBI BullBear

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

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

Diversification Opportunities for Citigroup and WBI BullBear

0.85

Correlation Coefficient

Citigroup  WBI BullBear

Very poor diversification

The 3 months correlation between Citigroup and WBI is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WBI BullBear Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Quality 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 WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Quality has no effect on the direction of Citigroup i.e., Citigroup and WBI BullBear go up and down completely randomly.

Pair Corralation between Citigroup and WBI BullBear

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.18 times more return on investment than WBI BullBear. However, Citigroup is 2.18 times more volatile than WBI BullBear Quality. It trades about 0.1 of its potential returns per unit of risk. WBI BullBear Quality is currently generating about 0.05 per unit of risk. If you would invest  6,092  in Citigroup on October 3, 2024 and sell it today you would earn a total of  947.00  from holding Citigroup or generate 15.54% return on investment over 90 days.

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

Citigroup  vs.  WBI BullBear Quality

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

WBI BullBear Quality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WBI BullBear Quality are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, WBI BullBear is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and WBI BullBear

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

The idea behind Citigroup and WBI BullBear Quality 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.