Correlation Between Citigroup and Decibel Cannabis

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

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

Diversification Opportunities for Citigroup and Decibel Cannabis

0.13

Correlation Coefficient

Citigroup  Decibel Cannabis

Average diversification

The 3 months correlation between Citigroup and Decibel is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Decibel Cannabis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decibel Cannabis 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 Decibel Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decibel Cannabis has no effect on the direction of Citigroup i.e., Citigroup and Decibel Cannabis go up and down completely randomly.

Pair Corralation between Citigroup and Decibel Cannabis

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.25 times more return on investment than Decibel Cannabis. However, Citigroup is 3.97 times less risky than Decibel Cannabis. It trades about 0.14 of its potential returns per unit of risk. Decibel Cannabis is currently generating about 0.03 per unit of risk. If you would invest  6,042  in Citigroup on September 4, 2024 and sell it today you would earn a total of  1,097  from holding Citigroup or generate 18.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Decibel Cannabis

Citigroup

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Decibel Cannabis

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Decibel Cannabis are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Decibel Cannabis reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Decibel Cannabis

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

The idea behind Citigroup and Decibel Cannabis 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 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.