Correlation Between Citigroup and SOVEREIGN TRUST

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

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

Diversification Opportunities for Citigroup and SOVEREIGN TRUST

0.62

Correlation Coefficient

Citigroup  SOVEREIGN TRUST

Poor diversification

The 3 months correlation between Citigroup and SOVEREIGN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SOVEREIGN TRUST INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOVEREIGN TRUST INSURANCE 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 SOVEREIGN TRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOVEREIGN TRUST INSURANCE has no effect on the direction of Citigroup i.e., Citigroup and SOVEREIGN TRUST go up and down completely randomly.

Pair Corralation between Citigroup and SOVEREIGN TRUST

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.53 times less return on investment than SOVEREIGN TRUST. But when comparing it to its historical volatility, Citigroup is 2.48 times less risky than SOVEREIGN TRUST. It trades about 0.2 of its potential returns per unit of risk. SOVEREIGN TRUST INSURANCE is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  64.00  in SOVEREIGN TRUST INSURANCE on September 13, 2024 and sell it today you would earn a total of  22.00  from holding SOVEREIGN TRUST INSURANCE or generate 34.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  SOVEREIGN TRUST INSURANCE

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

SOVEREIGN TRUST INSURANCE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SOVEREIGN TRUST INSURANCE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, SOVEREIGN TRUST demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and SOVEREIGN TRUST

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

The idea behind Citigroup and SOVEREIGN TRUST INSURANCE 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.