Correlation Between Citigroup and Wescan Goldfields

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

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

Diversification Opportunities for Citigroup and Wescan Goldfields

-0.72

Correlation Coefficient

Citigroup  Wescan Goldfields

Pay attention - limited upside

The 3 months correlation between Citigroup and Wescan is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Wescan Goldfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wescan Goldfields 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 Wescan Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wescan Goldfields has no effect on the direction of Citigroup i.e., Citigroup and Wescan Goldfields go up and down completely randomly.

Pair Corralation between Citigroup and Wescan Goldfields

Taking into account the 90-day investment horizon Citigroup is expected to generate 41.39 times less return on investment than Wescan Goldfields. But when comparing it to its historical volatility, Citigroup is 9.14 times less risky than Wescan Goldfields. It trades about 0.03 of its potential returns per unit of risk. Wescan Goldfields is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Wescan Goldfields on December 28, 2024 and sell it today you would earn a total of  3.00  from holding Wescan Goldfields or generate 150.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  Wescan Goldfields

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Wescan Goldfields

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wescan Goldfields are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Wescan Goldfields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Wescan Goldfields

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

The idea behind Citigroup and Wescan Goldfields 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.