Correlation Between Citigroup and Covenant Logistics

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

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

Diversification Opportunities for Citigroup and Covenant Logistics

0.86

Correlation Coefficient

Citigroup  Covenant Logistics

Very poor diversification

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

Pair Corralation between Citigroup and Covenant Logistics

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.86 times more return on investment than Covenant Logistics. However, Citigroup is 1.17 times less risky than Covenant Logistics. It trades about 0.01 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about -0.12 per unit of risk. If you would invest  7,087  in Citigroup on September 29, 2024 and sell it today you would earn a total of  13.00  from holding Citigroup or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  Covenant Logistics Group

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.

Covenant Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Covenant Logistics Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Covenant Logistics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Covenant Logistics

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

The idea behind Citigroup and Covenant Logistics Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.