Correlation Between Citigroup and Connecticut Light

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

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

Diversification Opportunities for Citigroup and Connecticut Light

-0.47

Correlation Coefficient

Citigroup  Connecticut Light

Very good diversification

The 3 months correlation between Citigroup and Connecticut is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light 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 Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Citigroup i.e., Citigroup and Connecticut Light go up and down completely randomly.

Pair Corralation between Citigroup and Connecticut Light

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.35 times more return on investment than Connecticut Light. However, Citigroup is 1.35 times more volatile than The Connecticut Light. It trades about 0.06 of its potential returns per unit of risk. The Connecticut Light is currently generating about 0.0 per unit of risk. If you would invest  6,297  in Citigroup on September 13, 2024 and sell it today you would earn a total of  846.00  from holding Citigroup or generate 13.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.63%
Values	Daily Returns

Citigroup  vs.  The Connecticut Light

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Connecticut Light

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and Connecticut Light

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

The idea behind Citigroup and The Connecticut Light 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.

Check out your portfolio center.

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.