Correlation Between Citigroup and Data Storage

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

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

Diversification Opportunities for Citigroup and Data Storage

0.49

Correlation Coefficient

Citigroup  Data Storage

Very weak diversification

The 3 months correlation between Citigroup and Data is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Data Storage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Storage Corp 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 Data Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Storage Corp has no effect on the direction of Citigroup i.e., Citigroup and Data Storage go up and down completely randomly.

Pair Corralation between Citigroup and Data Storage

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.75 times less return on investment than Data Storage. But when comparing it to its historical volatility, Citigroup is 3.76 times less risky than Data Storage. It trades about 0.26 of its potential returns per unit of risk. Data Storage Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  344.00  in Data Storage Corp on September 1, 2024 and sell it today you would earn a total of  48.00  from holding Data Storage Corp or generate 13.95% return on investment over 90 days.

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

Citigroup  vs.  Data Storage Corp

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Data Storage Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Data Storage Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Data Storage unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Data Storage

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

The idea behind Citigroup and Data Storage Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.