Correlation Between Citigroup and Short Small

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

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

Diversification Opportunities for Citigroup and Short Small

-0.85

Correlation Coefficient

Citigroup  Short Small

Pay attention - limited upside

The 3 months correlation between Citigroup and Short is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Short Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Small Cap 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 Short Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Short Small go up and down completely randomly.

Pair Corralation between Citigroup and Short Small

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.32 times more return on investment than Short Small. However, Citigroup is 1.32 times more volatile than Short Small Cap Profund. It trades about 0.14 of its potential returns per unit of risk. Short Small Cap Profund is currently generating about 0.01 per unit of risk. If you would invest  6,159  in Citigroup on September 20, 2024 and sell it today you would earn a total of  953.00  from holding Citigroup or generate 15.47% return on investment over 90 days.

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

Citigroup  vs.  Short Small Cap Profund

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

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.

Short Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Small Cap Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Short Small 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 Short Small

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

The idea behind Citigroup and Short Small Cap Profund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.