Correlation Between Citigroup and Palm Garden

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

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

Diversification Opportunities for Citigroup and Palm Garden

0.78

Correlation Coefficient

Citigroup  Palm Garden

Poor diversification

The 3 months correlation between Citigroup and Palm is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Palm Garden Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palm Garden Hotels 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 Palm Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palm Garden Hotels has no effect on the direction of Citigroup i.e., Citigroup and Palm Garden go up and down completely randomly.

Pair Corralation between Citigroup and Palm Garden

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.07 times less return on investment than Palm Garden. But when comparing it to its historical volatility, Citigroup is 1.35 times less risky than Palm Garden. It trades about 0.19 of its potential returns per unit of risk. Palm Garden Hotels is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,800  in Palm Garden Hotels on September 14, 2024 and sell it today you would earn a total of  1,960  from holding Palm Garden Hotels or generate 51.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.06%
Values	Daily Returns

Citigroup  vs.  Palm Garden Hotels

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.

Palm Garden Hotels

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Palm Garden Hotels are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Palm Garden sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Palm Garden

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

The idea behind Citigroup and Palm Garden Hotels 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.