Correlation Between Citigroup and Quality Hospitality

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

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

Diversification Opportunities for Citigroup and Quality Hospitality

0.36

Correlation Coefficient

Citigroup  Quality Hospitality

Weak diversification

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

Pair Corralation between Citigroup and Quality Hospitality

Taking into account the 90-day investment horizon Citigroup is expected to generate 15.33 times less return on investment than Quality Hospitality. But when comparing it to its historical volatility, Citigroup is 28.25 times less risky than Quality Hospitality. It trades about 0.08 of its potential returns per unit of risk. Quality Hospitality Leasehold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Quality Hospitality Leasehold on September 13, 2024 and sell it today you would earn a total of  104.00  from holding Quality Hospitality Leasehold or generate 40.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.96%
Values	Daily Returns

Citigroup  vs.  Quality Hospitality Leasehold

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Quality Hospitality

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Hospitality Leasehold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Quality Hospitality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Quality Hospitality

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

The idea behind Citigroup and Quality Hospitality Leasehold 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.