Correlation Between Citigroup and MicroSectors Travel

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

By analyzing existing cross correlation between Citigroup and MicroSectors Travel 3X, you can compare the effects of market volatilities on Citigroup and MicroSectors Travel 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 MicroSectors Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and MicroSectors Travel.

Diversification Opportunities for Citigroup and MicroSectors Travel

0.94

Correlation Coefficient

Citigroup  MicroSectors Travel

Almost no diversification

The 3 months correlation between Citigroup and MicroSectors is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and MicroSectors Travel 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Travel 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 MicroSectors Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Travel has no effect on the direction of Citigroup i.e., Citigroup and MicroSectors Travel go up and down completely randomly.

Pair Corralation between Citigroup and MicroSectors Travel

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.65 times less return on investment than MicroSectors Travel. But when comparing it to its historical volatility, Citigroup is 1.78 times less risky than MicroSectors Travel. It trades about 0.19 of its potential returns per unit of risk. MicroSectors Travel 3X is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,594  in MicroSectors Travel 3X on September 14, 2024 and sell it today you would earn a total of  2,760  from holding MicroSectors Travel 3X or generate 76.79% return on investment over 90 days.

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

Citigroup  vs.  MicroSectors Travel 3X

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

MicroSectors Travel

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Travel 3X are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MicroSectors Travel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and MicroSectors Travel

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

The idea behind Citigroup and MicroSectors Travel 3X 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.