Correlation Between Citigroup and Ratch Group

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

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

Diversification Opportunities for Citigroup and Ratch Group

-0.26

Correlation Coefficient

Citigroup  Ratch Group

Very good diversification

The 3 months correlation between Citigroup and Ratch is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ratch Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratch Group Public 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 Ratch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratch Group Public has no effect on the direction of Citigroup i.e., Citigroup and Ratch Group go up and down completely randomly.

Pair Corralation between Citigroup and Ratch Group

Taking into account the 90-day investment horizon Citigroup is expected to generate 121.43 times less return on investment than Ratch Group. But when comparing it to its historical volatility, Citigroup is 67.61 times less risky than Ratch Group. It trades about 0.06 of its potential returns per unit of risk. Ratch Group Public is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,612  in Ratch Group Public on September 26, 2024 and sell it today you would lose (587.00) from holding Ratch Group Public or give up 16.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.8%
Values	Daily Returns

Citigroup  vs.  Ratch Group Public

Citigroup

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Ratch Group Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ratch Group Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Ratch Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Ratch Group

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

The idea behind Citigroup and Ratch Group Public 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.