Correlation Between Citigroup and FIRST MUTUAL

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

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

Diversification Opportunities for Citigroup and FIRST MUTUAL

0.77

Correlation Coefficient

Citigroup  FIRST MUTUAL

Poor diversification

The 3 months correlation between Citigroup and FIRST is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and FIRST MUTUAL PROPERTIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST MUTUAL PROPERTIES 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 FIRST MUTUAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST MUTUAL PROPERTIES has no effect on the direction of Citigroup i.e., Citigroup and FIRST MUTUAL go up and down completely randomly.

Pair Corralation between Citigroup and FIRST MUTUAL

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.88 times less return on investment than FIRST MUTUAL. But when comparing it to its historical volatility, Citigroup is 2.9 times less risky than FIRST MUTUAL. It trades about 0.06 of its potential returns per unit of risk. FIRST MUTUAL PROPERTIES is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,800  in FIRST MUTUAL PROPERTIES on September 28, 2024 and sell it today you would earn a total of  8,510  from holding FIRST MUTUAL PROPERTIES or generate 223.95% return on investment over 90 days.

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

Citigroup  vs.  FIRST MUTUAL PROPERTIES

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

FIRST MUTUAL PROPERTIES

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST MUTUAL PROPERTIES are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, FIRST MUTUAL demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and FIRST MUTUAL

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

The idea behind Citigroup and FIRST MUTUAL PROPERTIES 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .