Correlation Between Citigroup and CPI Card

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

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

Diversification Opportunities for Citigroup and CPI Card

0.65

Correlation Coefficient

Citigroup  CPI Card

Poor diversification

The 3 months correlation between Citigroup and CPI is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CPI Card Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPI Card Group 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 CPI Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPI Card Group has no effect on the direction of Citigroup i.e., Citigroup and CPI Card go up and down completely randomly.

Pair Corralation between Citigroup and CPI Card

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.57 times less return on investment than CPI Card. But when comparing it to its historical volatility, Citigroup is 2.14 times less risky than CPI Card. It trades about 0.18 of its potential returns per unit of risk. CPI Card Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,579  in CPI Card Group on September 16, 2024 and sell it today you would earn a total of  851.00  from holding CPI Card Group or generate 33.0% return on investment over 90 days.

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

Citigroup  vs.  CPI Card Group

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

CPI Card Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPI Card Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CPI Card unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and CPI Card

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

The idea behind Citigroup and CPI Card Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.