Correlation Between Citigroup and Fab Form

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

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

Diversification Opportunities for Citigroup and Fab Form

-0.55

Correlation Coefficient

Citigroup  Fab Form

Excellent diversification

The 3 months correlation between Citigroup and Fab is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fab Form Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fab Form Industries 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 Fab Form. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fab Form Industries has no effect on the direction of Citigroup i.e., Citigroup and Fab Form go up and down completely randomly.

Pair Corralation between Citigroup and Fab Form

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.55 times less return on investment than Fab Form. But when comparing it to its historical volatility, Citigroup is 5.77 times less risky than Fab Form. It trades about 0.25 of its potential returns per unit of risk. Fab Form Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  130.00  in Fab Form Industries on September 13, 2024 and sell it today you would earn a total of  19.00  from holding Fab Form Industries or generate 14.62% 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.  Fab Form Industries

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Fab Form Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fab Form Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fab Form is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Fab Form

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

The idea behind Citigroup and Fab Form Industries 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.