Correlation Between Citigroup and Sierra Metals

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

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

Diversification Opportunities for Citigroup and Sierra Metals

0.54

Correlation Coefficient

Citigroup  Sierra Metals

Very weak diversification

The 3 months correlation between Citigroup and Sierra is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sierra Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Metals 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 Sierra Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Metals has no effect on the direction of Citigroup i.e., Citigroup and Sierra Metals go up and down completely randomly.

Pair Corralation between Citigroup and Sierra Metals

If you would invest  6,209  in Citigroup on August 30, 2024 and sell it today you would earn a total of  807.00  from holding Citigroup or generate 13.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Citigroup  vs.  Sierra Metals

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Sierra Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sierra Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sierra Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Sierra Metals

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

The idea behind Citigroup and Sierra Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.