Correlation Between Citigroup and Digital Locations

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

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

Diversification Opportunities for Citigroup and Digital Locations

-0.45

Correlation Coefficient

Citigroup  Digital Locations

Very good diversification

The 3 months correlation between Citigroup and Digital is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Digital Locations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Locations 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 Digital Locations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Locations has no effect on the direction of Citigroup i.e., Citigroup and Digital Locations go up and down completely randomly.

Pair Corralation between Citigroup and Digital Locations

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.07 times more return on investment than Digital Locations. However, Citigroup is 15.23 times less risky than Digital Locations. It trades about 0.17 of its potential returns per unit of risk. Digital Locations is currently generating about -0.2 per unit of risk. If you would invest  6,980  in Citigroup on September 12, 2024 and sell it today you would earn a total of  216.00  from holding Citigroup or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Digital Locations

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Digital Locations

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Digital Locations are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Digital Locations exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Digital Locations

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

The idea behind Citigroup and Digital Locations 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.