Correlation Between Citigroup and SMG Industries

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

Diversification Opportunities for Citigroup and SMG Industries

-0.7
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Citigroup and SMG is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SMG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMG Industries 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 SMG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMG Industries has no effect on the direction of Citigroup i.e., Citigroup and SMG Industries go up and down completely randomly.

Pair Corralation between Citigroup and SMG Industries

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.17 times more return on investment than SMG Industries. However, Citigroup is 5.93 times less risky than SMG Industries. It trades about 0.17 of its potential returns per unit of risk. SMG Industries is currently generating about -0.12 per unit of risk. If you would invest  5,877  in Citigroup on September 17, 2024 and sell it today you would earn a total of  1,272  from holding Citigroup or generate 21.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  SMG Industries

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.
SMG Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SMG Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Citigroup and SMG Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and SMG Industries

The main advantage of trading using opposite Citigroup and SMG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, SMG Industries 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 SMG Industries will offset losses from the drop in SMG Industries' long position.
The idea behind Citigroup and SMG Industries 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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