Correlation Between Citigroup and Sensen Networks

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

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

Diversification Opportunities for Citigroup and Sensen Networks

-0.66

Correlation Coefficient

Citigroup  Sensen Networks

Excellent diversification

The 3 months correlation between Citigroup and Sensen is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sensen Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensen Networks 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 Sensen Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensen Networks has no effect on the direction of Citigroup i.e., Citigroup and Sensen Networks go up and down completely randomly.

Pair Corralation between Citigroup and Sensen Networks

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.38 times less return on investment than Sensen Networks. But when comparing it to its historical volatility, Citigroup is 4.24 times less risky than Sensen Networks. It trades about 0.07 of its potential returns per unit of risk. Sensen Networks is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5.20  in Sensen Networks on September 25, 2024 and sell it today you would lose (1.60) from holding Sensen Networks or give up 30.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.0%
Values	Daily Returns

Citigroup  vs.  Sensen Networks

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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

Sensen Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sensen Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Citigroup and Sensen Networks

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

The idea behind Citigroup and Sensen Networks 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.