Correlation Between Citigroup and Plum Acquisition

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

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

Diversification Opportunities for Citigroup and Plum Acquisition

0.36

Correlation Coefficient

Citigroup  Plum Acquisition

Weak diversification

The 3 months correlation between Citigroup and Plum is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition Corp 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of Citigroup i.e., Citigroup and Plum Acquisition go up and down completely randomly.

Pair Corralation between Citigroup and Plum Acquisition

Taking into account the 90-day investment horizon Citigroup is expected to generate 419.41 times less return on investment than Plum Acquisition. But when comparing it to its historical volatility, Citigroup is 18.7 times less risky than Plum Acquisition. It trades about 0.02 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  5.15  in Plum Acquisition Corp on September 22, 2024 and sell it today you would earn a total of  14.85  from holding Plum Acquisition Corp or generate 288.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Citigroup  vs.  Plum Acquisition Corp

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Plum Acquisition Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Plum Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Plum Acquisition

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

The idea behind Citigroup and Plum Acquisition Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.