Correlation Between Citigroup and Alpha Divisions

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

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

Diversification Opportunities for Citigroup and Alpha Divisions

-0.85

Correlation Coefficient

Citigroup  Alpha Divisions

Pay attention - limited upside

The 3 months correlation between Citigroup and Alpha is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alpha Divisions PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Divisions PCL 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 Alpha Divisions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Divisions PCL has no effect on the direction of Citigroup i.e., Citigroup and Alpha Divisions go up and down completely randomly.

Pair Corralation between Citigroup and Alpha Divisions

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.76 times more return on investment than Alpha Divisions. However, Citigroup is 1.31 times less risky than Alpha Divisions. It trades about 0.07 of its potential returns per unit of risk. Alpha Divisions PCL is currently generating about -0.15 per unit of risk. If you would invest  6,975  in Citigroup on September 27, 2024 and sell it today you would earn a total of  125.00  from holding Citigroup or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Citigroup  vs.  Alpha Divisions PCL

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.

Alpha Divisions PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Divisions PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and Alpha Divisions

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

The idea behind Citigroup and Alpha Divisions PCL 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.