Correlation Between Citigroup and Select Equity

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Select Equity 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 Select Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Select Equity Fund, you can compare the effects of market volatilities on Citigroup and Select Equity 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 Select Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Select Equity.

Diversification Opportunities for Citigroup and Select Equity

CitigroupSelectDiversified AwayCitigroupSelectDiversified Away100%
0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Citigroup and Select is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity 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 Select Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Citigroup i.e., Citigroup and Select Equity go up and down completely randomly.

Pair Corralation between Citigroup and Select Equity

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.76 times more return on investment than Select Equity. However, Citigroup is 1.31 times less risky than Select Equity. It trades about 0.06 of its potential returns per unit of risk. Select Equity Fund is currently generating about -0.04 per unit of risk. If you would invest  6,350  in Citigroup on September 30, 2024 and sell it today you would earn a total of  750.00  from holding Citigroup or generate 11.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Select Equity Fund

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-1001020
JavaScript chart by amCharts 3.21.15C RTDRX
       Timeline  
Citigroup 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDec62646668707274
Select Equity 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Select Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
JavaScript chart by amCharts 3.21.15NovDecDec161718192021

Citigroup and Select Equity Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.58-4.18-2.78-1.38-0.02331.493.04.516.02 0.020.040.060.080.100.12
JavaScript chart by amCharts 3.21.15C RTDRX
       Returns  

Pair Trading with Citigroup and Select Equity

The main advantage of trading using opposite Citigroup and Select Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Select Equity 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 Select Equity will offset losses from the drop in Select Equity's long position.
The idea behind Citigroup and Select Equity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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