Correlation Between Citigroup and CF Acquisition

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

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

Diversification Opportunities for Citigroup and CF Acquisition

0.76

Correlation Coefficient

Citigroup  CF Acquisition

Poor diversification

The 3 months correlation between Citigroup and CFIV is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CF Acquisition IV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition IV 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 CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition IV has no effect on the direction of Citigroup i.e., Citigroup and CF Acquisition go up and down completely randomly.

Pair Corralation between Citigroup and CF Acquisition

If you would invest  5,937  in Citigroup on September 18, 2024 and sell it today you would earn a total of  1,212  from holding Citigroup or generate 20.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Citigroup  vs.  CF Acquisition IV

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

CF Acquisition IV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Acquisition IV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, CF Acquisition is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and CF Acquisition

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

The idea behind Citigroup and CF Acquisition IV 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.