Correlation Between Citigroup and Senci Electric

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

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

Diversification Opportunities for Citigroup and Senci Electric

0.72

Correlation Coefficient

Citigroup  Senci Electric

Poor diversification

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

Pair Corralation between Citigroup and Senci Electric

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.76 times less return on investment than Senci Electric. But when comparing it to its historical volatility, Citigroup is 1.65 times less risky than Senci Electric. It trades about 0.14 of its potential returns per unit of risk. Senci Electric Machinery is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,375  in Senci Electric Machinery on September 27, 2024 and sell it today you would earn a total of  358.00  from holding Senci Electric Machinery or generate 26.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Citigroup  vs.  Senci Electric Machinery

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Senci Electric Machinery

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Senci Electric Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Senci Electric sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Senci Electric

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

The idea behind Citigroup and Senci Electric Machinery 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.