Correlation Between Citigroup and Aluminum

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

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

Diversification Opportunities for Citigroup and Aluminum

-0.75

Correlation Coefficient

Citigroup  Aluminum

Pay attention - limited upside

The 3 months correlation between Citigroup and Aluminum is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum 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 Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of Citigroup i.e., Citigroup and Aluminum go up and down completely randomly.

Pair Corralation between Citigroup and Aluminum

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.38 times more return on investment than Aluminum. However, Citigroup is 2.61 times less risky than Aluminum. It trades about 0.14 of its potential returns per unit of risk. Aluminum of is currently generating about -0.1 per unit of risk. If you would invest  6,127  in Citigroup on October 1, 2024 and sell it today you would earn a total of  973.00  from holding Citigroup or generate 15.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Aluminum of

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.

Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aluminum of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and Aluminum

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

The idea behind Citigroup and Aluminum of 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.