Correlation Between Citigroup and Columbia Seligman

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

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

Diversification Opportunities for Citigroup and Columbia Seligman

0.74

Correlation Coefficient

Citigroup  Columbia Seligman

Poor diversification

The 3 months correlation between Citigroup and Columbia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Columbia Seligman Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Seligman Global 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 Columbia Seligman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Seligman Global has no effect on the direction of Citigroup i.e., Citigroup and Columbia Seligman go up and down completely randomly.

Pair Corralation between Citigroup and Columbia Seligman

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.25 times more return on investment than Columbia Seligman. However, Citigroup is 1.25 times more volatile than Columbia Seligman Global. It trades about 0.12 of its potential returns per unit of risk. Columbia Seligman Global is currently generating about 0.08 per unit of risk. If you would invest  4,004  in Citigroup on September 12, 2024 and sell it today you would earn a total of  3,200  from holding Citigroup or generate 79.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.98%
Values	Daily Returns

Citigroup  vs.  Columbia Seligman Global

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Columbia Seligman Global

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Columbia Seligman Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Seligman may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Columbia Seligman

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

The idea behind Citigroup and Columbia Seligman Global 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.