Correlation Between Citigroup and Value Capital

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

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

Diversification Opportunities for Citigroup and Value Capital

-0.29

Correlation Coefficient

Citigroup  Value Capital

Very good diversification

The 3 months correlation between Citigroup and Value is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Value Capital One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Capital 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 Value Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Capital One has no effect on the direction of Citigroup i.e., Citigroup and Value Capital go up and down completely randomly.

Pair Corralation between Citigroup and Value Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.55 times more return on investment than Value Capital. However, Citigroup is 1.8 times less risky than Value Capital. It trades about 0.12 of its potential returns per unit of risk. Value Capital One is currently generating about 0.04 per unit of risk. If you would invest  6,205  in Citigroup on September 30, 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	73.44%
Values	Daily Returns

Citigroup  vs.  Value Capital 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.

Value Capital One

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Value Capital One are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Value Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Value Capital

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

The idea behind Citigroup and Value Capital 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.