Correlation Between Citigroup and FNB Government

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

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

Diversification Opportunities for Citigroup and FNB Government

-0.68

Correlation Coefficient

Citigroup  FNB Government

Excellent diversification

The 3 months correlation between Citigroup and FNB is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and FNB Government Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Government Inflation 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 FNB Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Government Inflation has no effect on the direction of Citigroup i.e., Citigroup and FNB Government go up and down completely randomly.

Pair Corralation between Citigroup and FNB Government

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.22 times more return on investment than FNB Government. However, Citigroup is 7.22 times more volatile than FNB Government Inflation. It trades about 0.15 of its potential returns per unit of risk. FNB Government Inflation is currently generating about 0.0 per unit of risk. If you would invest  6,010  in Citigroup on September 5, 2024 and sell it today you would earn a total of  1,140  from holding Citigroup or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  FNB Government Inflation

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

FNB Government Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FNB Government Inflation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, FNB Government is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and FNB Government

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

The idea behind Citigroup and FNB Government Inflation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.