Correlation Between Citigroup and Pax High

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

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

Diversification Opportunities for Citigroup and Pax High

0.34

Correlation Coefficient

Citigroup  Pax High

Weak diversification

The 3 months correlation between Citigroup and PAX is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pax High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax High Yield 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 Pax High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax High Yield has no effect on the direction of Citigroup i.e., Citigroup and Pax High go up and down completely randomly.

Pair Corralation between Citigroup and Pax High

Taking into account the 90-day investment horizon Citigroup is expected to generate 12.89 times more return on investment than Pax High. However, Citigroup is 12.89 times more volatile than Pax High Yield. It trades about 0.32 of its potential returns per unit of risk. Pax High Yield is currently generating about 0.15 per unit of risk. If you would invest  6,235  in Citigroup on September 3, 2024 and sell it today you would earn a total of  852.00  from holding Citigroup or generate 13.66% return on investment over 90 days.

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

Citigroup  vs.  Pax High Yield

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Pax High Yield

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pax High Yield are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Pax High 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 Pax High

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

The idea behind Citigroup and Pax High Yield 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.