Correlation Between Citigroup and Intl Star

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

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

Diversification Opportunities for Citigroup and Intl Star

-0.42

Correlation Coefficient

Citigroup  Intl Star

Very good diversification

The 3 months correlation between Citigroup and Intl is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Intl Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intl Star 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 Intl Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intl Star has no effect on the direction of Citigroup i.e., Citigroup and Intl Star go up and down completely randomly.

Pair Corralation between Citigroup and Intl Star

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.15 times more return on investment than Intl Star. However, Citigroup is 6.67 times less risky than Intl Star. It trades about 0.14 of its potential returns per unit of risk. Intl Star is currently generating about 0.01 per unit of risk. If you would invest  6,042  in Citigroup on September 4, 2024 and sell it today you would earn a total of  1,100  from holding Citigroup or generate 18.21% return on investment over 90 days.

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

Citigroup  vs.  Intl Star

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.

Intl Star

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Intl Star are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Intl Star may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Intl Star

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

The idea behind Citigroup and Intl Star 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.