Correlation Between Citigroup and Macquarie Group

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

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

Diversification Opportunities for Citigroup and Macquarie Group

0.2

Correlation Coefficient

Citigroup  Macquarie Group

Modest diversification

The 3 months correlation between Citigroup and Macquarie is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Macquarie Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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 Macquarie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Citigroup i.e., Citigroup and Macquarie Group go up and down completely randomly.

Pair Corralation between Citigroup and Macquarie Group

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.12 times more return on investment than Macquarie Group. However, Citigroup is 1.12 times more volatile than Macquarie Group Limited. It trades about 0.09 of its potential returns per unit of risk. Macquarie Group Limited is currently generating about 0.06 per unit of risk. If you would invest  4,959  in Citigroup on September 24, 2024 and sell it today you would earn a total of  1,960  from holding Citigroup or generate 39.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.42%
Values	Daily Returns

Citigroup  vs.  Macquarie Group Limited

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.

Macquarie Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Macquarie Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Macquarie Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Macquarie Group

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

The idea behind Citigroup and Macquarie Group Limited 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.