Correlation Between Citigroup and Jerusalem

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

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

Diversification Opportunities for Citigroup and Jerusalem

0.89

Correlation Coefficient

Citigroup  Jerusalem

Very poor diversification

The 3 months correlation between Citigroup and Jerusalem is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Jerusalem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jerusalem 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 Jerusalem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jerusalem has no effect on the direction of Citigroup i.e., Citigroup and Jerusalem go up and down completely randomly.

Pair Corralation between Citigroup and Jerusalem

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.21 times less return on investment than Jerusalem. But when comparing it to its historical volatility, Citigroup is 2.45 times less risky than Jerusalem. It trades about 0.27 of its potential returns per unit of risk. Jerusalem is currently generating about 0.67 of returns per unit of risk over similar time horizon. If you would invest  144,000  in Jerusalem on September 14, 2024 and sell it today you would earn a total of  37,400  from holding Jerusalem or generate 25.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.71%
Values	Daily Returns

Citigroup  vs.  Jerusalem

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Jerusalem

Risk-Adjusted Performance

40 of 100

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Jerusalem are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jerusalem sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Jerusalem

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

The idea behind Citigroup and Jerusalem 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.