Correlation Between Citigroup and Agritech

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

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

Diversification Opportunities for Citigroup and Agritech

0.63

Correlation Coefficient

Citigroup  Agritech

Poor diversification

The 3 months correlation between Citigroup and Agritech is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech 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 Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Citigroup i.e., Citigroup and Agritech go up and down completely randomly.

Pair Corralation between Citigroup and Agritech

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times less return on investment than Agritech. But when comparing it to its historical volatility, Citigroup is 1.57 times less risky than Agritech. It trades about 0.13 of its potential returns per unit of risk. Agritech is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,119  in Agritech on September 2, 2024 and sell it today you would earn a total of  690.00  from holding Agritech or generate 22.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  Agritech

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

Agritech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agritech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Agritech

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

The idea behind Citigroup and Agritech 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.