Correlation Between Citigroup and EMC2

Can any of the company-specific risk be diversified away by investing in both Citigroup and EMC2 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 EMC2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and EMC2, you can compare the effects of market volatilities on Citigroup and EMC2 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 EMC2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and EMC2.

Diversification Opportunities for Citigroup and EMC2

0.9

Correlation Coefficient

Citigroup  EMC2

Almost no diversification

The 3 months correlation between Citigroup and EMC2 is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and EMC2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMC2 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 EMC2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMC2 has no effect on the direction of Citigroup i.e., Citigroup and EMC2 go up and down completely randomly.

Pair Corralation between Citigroup and EMC2

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.29 times less return on investment than EMC2. But when comparing it to its historical volatility, Citigroup is 1.67 times less risky than EMC2. It trades about 0.13 of its potential returns per unit of risk. EMC2 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  0.03  in EMC2 on September 1, 2024 and sell it today you would earn a total of  0.02  from holding EMC2 or generate 67.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.92%
Values	Daily Returns

Citigroup  vs.  EMC2

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.

EMC2

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EMC2 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EMC2 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and EMC2

The main advantage of trading using opposite Citigroup and EMC2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, EMC2 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 EMC2 will offset losses from the drop in EMC2's long position.

The idea behind Citigroup and EMC2 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 CEOs Directory module to screen CEOs from public companies around the world.