Correlation Between Citigroup and Searchlight Resources

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

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

Diversification Opportunities for Citigroup and Searchlight Resources

0.04

Correlation Coefficient

Citigroup  Searchlight Resources

Significant diversification

The 3 months correlation between Citigroup and Searchlight is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Searchlight Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Searchlight Resources 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 Searchlight Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Searchlight Resources has no effect on the direction of Citigroup i.e., Citigroup and Searchlight Resources go up and down completely randomly.

Pair Corralation between Citigroup and Searchlight Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 18.48 times less return on investment than Searchlight Resources. But when comparing it to its historical volatility, Citigroup is 17.15 times less risky than Searchlight Resources. It trades about 0.12 of its potential returns per unit of risk. Searchlight Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Searchlight Resources on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Searchlight Resources or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Citigroup  vs.  Searchlight Resources

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

Searchlight Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Searchlight Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Searchlight Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Searchlight Resources

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

The idea behind Citigroup and Searchlight Resources 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.