Correlation Between Citigroup and Franklin Floating

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

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

Diversification Opportunities for Citigroup and Franklin Floating

0.94

Correlation Coefficient

Citigroup  Franklin Floating

Almost no diversification

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

Pair Corralation between Citigroup and Franklin Floating

Taking into account the 90-day investment horizon Citigroup is expected to generate 20.49 times more return on investment than Franklin Floating. However, Citigroup is 20.49 times more volatile than Franklin Floating Rate. It trades about 0.16 of its potential returns per unit of risk. Franklin Floating Rate is currently generating about 0.37 per unit of risk. If you would invest  5,937  in Citigroup on September 18, 2024 and sell it today you would earn a total of  1,212  from holding Citigroup or generate 20.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Franklin Floating Rate

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Franklin Floating Rate

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Floating Rate are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong fundamental indicators, Franklin Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Franklin Floating

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

The idea behind Citigroup and Franklin Floating Rate 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.