Correlation Between Citigroup and Spectrum Income

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

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

Diversification Opportunities for Citigroup and Spectrum Income

-0.61

Correlation Coefficient

Citigroup  Spectrum Income

Excellent diversification

The 3 months correlation between Citigroup and Spectrum is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Spectrum Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Income 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 Spectrum Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Income has no effect on the direction of Citigroup i.e., Citigroup and Spectrum Income go up and down completely randomly.

Pair Corralation between Citigroup and Spectrum Income

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.06 times more return on investment than Spectrum Income. However, Citigroup is 10.06 times more volatile than Spectrum Income Fund. It trades about 0.12 of its potential returns per unit of risk. Spectrum Income Fund is currently generating about -0.01 per unit of risk. If you would invest  6,092  in Citigroup on August 31, 2024 and sell it today you would earn a total of  924.00  from holding Citigroup or generate 15.17% return on investment over 90 days.

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

Citigroup  vs.  Spectrum Income Fund

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Spectrum Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spectrum Income Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Spectrum Income 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 Spectrum Income

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

The idea behind Citigroup and Spectrum Income Fund 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.