Correlation Between Citigroup and Pzena Mid

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

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

Diversification Opportunities for Citigroup and Pzena Mid

0.6

Correlation Coefficient

Citigroup  Pzena Mid

Poor diversification

The 3 months correlation between Citigroup and Pzena is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pzena Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena Mid Cap 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 Pzena Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena Mid Cap has no effect on the direction of Citigroup i.e., Citigroup and Pzena Mid go up and down completely randomly.

Pair Corralation between Citigroup and Pzena Mid

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.94 times more return on investment than Pzena Mid. However, Citigroup is 1.94 times more volatile than Pzena Mid Cap. It trades about 0.18 of its potential returns per unit of risk. Pzena Mid Cap is currently generating about 0.03 per unit of risk. If you would invest  5,788  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

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

Citigroup  vs.  Pzena Mid Cap

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.

Pzena Mid Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pzena Mid Cap are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Pzena Mid 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 Pzena Mid

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

The idea behind Citigroup and Pzena Mid Cap 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.