Correlation Between Citigroup and Australian Strategic

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

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

Diversification Opportunities for Citigroup and Australian Strategic

-0.5

Correlation Coefficient

Citigroup  Australian Strategic

Very good diversification

The 3 months correlation between Citigroup and Australian is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic 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 Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Citigroup i.e., Citigroup and Australian Strategic go up and down completely randomly.

Pair Corralation between Citigroup and Australian Strategic

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.4 times more return on investment than Australian Strategic. However, Citigroup is 2.49 times less risky than Australian Strategic. It trades about 0.19 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about 0.01 per unit of risk. If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,408  from holding Citigroup or generate 24.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Australian Strategic Materials

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Australian Strategic

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Citigroup and Australian Strategic

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

The idea behind Citigroup and Australian Strategic Materials 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.