Correlation Between Citigroup and Short Term

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

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

Diversification Opportunities for Citigroup and Short Term

0.26

Correlation Coefficient

Citigroup  Short Term

Modest diversification

The 3 months correlation between Citigroup and Short is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Short Term Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Municipal 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Municipal has no effect on the direction of Citigroup i.e., Citigroup and Short Term go up and down completely randomly.

Pair Corralation between Citigroup and Short Term

Taking into account the 90-day investment horizon Citigroup is expected to generate 18.68 times more return on investment than Short Term. However, Citigroup is 18.68 times more volatile than Short Term Municipal Bond. It trades about 0.13 of its potential returns per unit of risk. Short Term Municipal Bond is currently generating about -0.08 per unit of risk. If you would invest  6,205  in Citigroup on September 28, 2024 and sell it today you would earn a total of  895.00  from holding Citigroup or generate 14.42% return on investment over 90 days.

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

Citigroup  vs.  Short Term Municipal Bond

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

Short Term Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Term Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Short Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Short Term

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

The idea behind Citigroup and Short Term Municipal Bond 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.