Correlation Between Citigroup and Headwater Gold

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

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

Diversification Opportunities for Citigroup and Headwater Gold

-0.36

Correlation Coefficient

Citigroup  Headwater Gold

Very good diversification

The 3 months correlation between Citigroup and Headwater is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Headwater Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Gold 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 Headwater Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Gold has no effect on the direction of Citigroup i.e., Citigroup and Headwater Gold go up and down completely randomly.

Pair Corralation between Citigroup and Headwater Gold

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.77 times less return on investment than Headwater Gold. But when comparing it to its historical volatility, Citigroup is 3.4 times less risky than Headwater Gold. It trades about 0.06 of its potential returns per unit of risk. Headwater Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Headwater Gold on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Headwater Gold or generate 14.29% return on investment over 90 days.

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

Citigroup  vs.  Headwater Gold

Citigroup

Risk-Adjusted Performance

15 of 100

Good

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.

Headwater Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Headwater Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Headwater Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Headwater Gold

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

The idea behind Citigroup and Headwater Gold 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.