Correlation Between Citigroup and WR Berkley

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

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

Diversification Opportunities for Citigroup and WR Berkley

-0.68

Correlation Coefficient

Citigroup  WR Berkley

Excellent diversification

The 3 months correlation between Citigroup and WRB-PF is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WR Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WR Berkley 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 WR Berkley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WR Berkley has no effect on the direction of Citigroup i.e., Citigroup and WR Berkley go up and down completely randomly.

Pair Corralation between Citigroup and WR Berkley

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.74 times more return on investment than WR Berkley. However, Citigroup is 1.74 times more volatile than WR Berkley. It trades about 0.1 of its potential returns per unit of risk. WR Berkley is currently generating about 0.04 per unit of risk. If you would invest  4,460  in Citigroup on September 12, 2024 and sell it today you would earn a total of  2,790  from holding Citigroup or generate 62.56% return on investment over 90 days.

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

Citigroup  vs.  WR Berkley

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

WR Berkley

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and WR Berkley

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

The idea behind Citigroup and WR Berkley 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.