Correlation Between Citigroup and CAFCA

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

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

Diversification Opportunities for Citigroup and CAFCA

0.86

Correlation Coefficient

Citigroup  CAFCA

Very poor diversification

The 3 months correlation between Citigroup and CAFCA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CAFCA LIMITED in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAFCA LIMITED 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 CAFCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAFCA LIMITED has no effect on the direction of Citigroup i.e., Citigroup and CAFCA go up and down completely randomly.

Pair Corralation between Citigroup and CAFCA

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.85 times less return on investment than CAFCA. But when comparing it to its historical volatility, Citigroup is 1.6 times less risky than CAFCA. It trades about 0.13 of its potential returns per unit of risk. CAFCA LIMITED is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  140,000  in CAFCA LIMITED on September 28, 2024 and sell it today you would earn a total of  65,000  from holding CAFCA LIMITED or generate 46.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  CAFCA LIMITED

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

CAFCA LIMITED

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CAFCA LIMITED are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, CAFCA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and CAFCA

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

The idea behind Citigroup and CAFCA LIMITED 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.