Correlation Between Citigroup and Prudential Day

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

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

Diversification Opportunities for Citigroup and Prudential Day

-0.14

Correlation Coefficient

Citigroup  Prudential Day

Good diversification

The 3 months correlation between Citigroup and Prudential is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Prudential Day One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Day One 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 Prudential Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Day One has no effect on the direction of Citigroup i.e., Citigroup and Prudential Day go up and down completely randomly.

Pair Corralation between Citigroup and Prudential Day

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.29 times more return on investment than Prudential Day. However, Citigroup is 1.29 times more volatile than Prudential Day One. It trades about 0.13 of its potential returns per unit of risk. Prudential Day One is currently generating about -0.14 per unit of risk. If you would invest  6,205  in Citigroup on September 29, 2024 and sell it today you would earn a total of  895.00  from holding Citigroup or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Prudential Day One

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Prudential Day One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Day One has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Citigroup and Prudential Day

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

The idea behind Citigroup and Prudential Day One 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.