Correlation Between Citigroup and Solution Financial

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

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

Diversification Opportunities for Citigroup and Solution Financial

-0.63

Correlation Coefficient

Citigroup  Solution Financial

Excellent diversification

The 3 months correlation between Citigroup and Solution is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Solution Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solution Financial 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 Solution Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solution Financial has no effect on the direction of Citigroup i.e., Citigroup and Solution Financial go up and down completely randomly.

Pair Corralation between Citigroup and Solution Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.47 times less return on investment than Solution Financial. But when comparing it to its historical volatility, Citigroup is 1.38 times less risky than Solution Financial. It trades about 0.06 of its potential returns per unit of risk. Solution Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Solution Financial on September 21, 2024 and sell it today you would earn a total of  1.00  from holding Solution Financial or generate 3.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Solution Financial

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Solution Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solution Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Solution Financial is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Solution Financial

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

The idea behind Citigroup and Solution Financial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.