Correlation Between SM Investments and Citigroup

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

By analyzing existing cross correlation between SM Investments and Citigroup, you can compare the effects of market volatilities on SM Investments and Citigroup 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 SM Investments with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of SM Investments and Citigroup.

Diversification Opportunities for SM Investments and Citigroup

0.56

Correlation Coefficient

SM Investments  Citigroup

Very weak diversification

The 3 months correlation between SVTMF and Citigroup is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and SM Investments 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 SM Investments are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of SM Investments i.e., SM Investments and Citigroup go up and down completely randomly.

Pair Corralation between SM Investments and Citigroup

Assuming the 90 days horizon SM Investments is expected to generate 85.33 times less return on investment than Citigroup. In addition to that, SM Investments is 1.15 times more volatile than Citigroup. It trades about 0.0 of its total potential returns per unit of risk. Citigroup is currently generating about 0.06 per unit of volatility. If you would invest  4,708  in Citigroup on October 11, 2024 and sell it today you would earn a total of  2,618  from holding Citigroup or generate 55.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.31%
Values	Daily Returns

SM Investments  vs.  Citigroup

SM Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SM Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, SM Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Citigroup

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Pair Trading with SM Investments and Citigroup

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

The idea behind SM Investments and Citigroup 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.