Correlation Between Citigroup and Aviation Links

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

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

Diversification Opportunities for Citigroup and Aviation Links

0.77

Correlation Coefficient

Citigroup  Aviation Links

Poor diversification

The 3 months correlation between Citigroup and Aviation is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Aviation Links in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviation Links 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 Aviation Links. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviation Links has no effect on the direction of Citigroup i.e., Citigroup and Aviation Links go up and down completely randomly.

Pair Corralation between Citigroup and Aviation Links

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.9 times less return on investment than Aviation Links. In addition to that, Citigroup is 1.02 times more volatile than Aviation Links. It trades about 0.14 of its total potential returns per unit of risk. Aviation Links is currently generating about 0.27 per unit of volatility. If you would invest  133,700  in Aviation Links on September 27, 2024 and sell it today you would earn a total of  31,100  from holding Aviation Links or generate 23.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	70.31%
Values	Daily Returns

Citigroup  vs.  Aviation Links

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.

Aviation Links

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aviation Links are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aviation Links sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Aviation Links

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

The idea behind Citigroup and Aviation Links 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..