Correlation Between Citigroup and Dell Technologies

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

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

Diversification Opportunities for Citigroup and Dell Technologies

0.9

Correlation Coefficient

Citigroup  Dell Technologies

Almost no diversification

The 3 months correlation between Citigroup and Dell is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Citigroup i.e., Citigroup and Dell Technologies go up and down completely randomly.

Pair Corralation between Citigroup and Dell Technologies

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.57 times more return on investment than Dell Technologies. However, Citigroup is 1.75 times less risky than Dell Technologies. It trades about 0.2 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.09 per unit of risk. If you would invest  6,412  in Citigroup on August 30, 2024 and sell it today you would earn a total of  604.00  from holding Citigroup or generate 9.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	91.3%
Values	Daily Returns

Citigroup  vs.  Dell Technologies

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Dell Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Dell Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Dell Technologies

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

The idea behind Citigroup and Dell Technologies 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.