Correlation Between Citigroup and Spot Coffee

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

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

Diversification Opportunities for Citigroup and Spot Coffee

-0.16

Correlation Coefficient

Citigroup  Spot Coffee

Good diversification

The 3 months correlation between Citigroup and Spot is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Spot Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spot Coffee 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 Spot Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spot Coffee has no effect on the direction of Citigroup i.e., Citigroup and Spot Coffee go up and down completely randomly.

Pair Corralation between Citigroup and Spot Coffee

Taking into account the 90-day investment horizon Citigroup is expected to generate 61.55 times less return on investment than Spot Coffee. But when comparing it to its historical volatility, Citigroup is 58.94 times less risky than Spot Coffee. It trades about 0.13 of its potential returns per unit of risk. Spot Coffee is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.27  in Spot Coffee on September 3, 2024 and sell it today you would lose (0.07) from holding Spot Coffee or give up 25.93% of portfolio value over 90 days.

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

Citigroup  vs.  Spot Coffee

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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

Spot Coffee

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Spot Coffee are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Spot Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Spot Coffee

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

The idea behind Citigroup and Spot Coffee 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 Commodity Directory module to find actively traded commodities issued by global exchanges.