Correlation Between Citigroup and Big Rock

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

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

Diversification Opportunities for Citigroup and Big Rock

-0.32

Correlation Coefficient

Citigroup  Big Rock

Very good diversification

The 3 months correlation between Citigroup and Big is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery 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 Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Citigroup i.e., Citigroup and Big Rock go up and down completely randomly.

Pair Corralation between Citigroup and Big Rock

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.34 times more return on investment than Big Rock. However, Citigroup is 2.97 times less risky than Big Rock. It trades about 0.07 of its potential returns per unit of risk. Big Rock Brewery is currently generating about 0.02 per unit of risk. If you would invest  6,046  in Citigroup on September 23, 2024 and sell it today you would earn a total of  873.00  from holding Citigroup or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Citigroup  vs.  Big Rock Brewery

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Big Rock is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Big Rock

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

The idea behind Citigroup and Big Rock Brewery 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.