Correlation Between Citigroup and Leading Edge

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

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

Diversification Opportunities for Citigroup and Leading Edge

-0.43

Correlation Coefficient

Citigroup  Leading Edge

Very good diversification

The 3 months correlation between Citigroup and Leading is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Citigroup i.e., Citigroup and Leading Edge go up and down completely randomly.

Pair Corralation between Citigroup and Leading Edge

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than Leading Edge. However, Citigroup is 1.65 times less risky than Leading Edge. It trades about 0.19 of its potential returns per unit of risk. Leading Edge Materials is currently generating about 0.03 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,427  from holding Citigroup or generate 24.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  Leading Edge Materials

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.

Leading Edge Materials

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Leading Edge Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Leading Edge is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Leading Edge

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

The idea behind Citigroup and Leading Edge Materials 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 Stocks Directory module to find actively traded stocks across global markets.