Correlation Between Citigroup and Shapir Engineering

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

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

Diversification Opportunities for Citigroup and Shapir Engineering

0.89

Correlation Coefficient

Citigroup  Shapir Engineering

Very poor diversification

The 3 months correlation between Citigroup and Shapir is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shapir Engineering Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shapir Engineering 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 Shapir Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shapir Engineering has no effect on the direction of Citigroup i.e., Citigroup and Shapir Engineering go up and down completely randomly.

Pair Corralation between Citigroup and Shapir Engineering

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Shapir Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.77 times less risky than Shapir Engineering. The stock trades about -0.09 of its potential returns per unit of risk. The Shapir Engineering Industry is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  262,000  in Shapir Engineering Industry on September 24, 2024 and sell it today you would earn a total of  24,300  from holding Shapir Engineering Industry or generate 9.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	80.95%
Values	Daily Returns

Citigroup  vs.  Shapir Engineering Industry

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Shapir Engineering

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shapir Engineering Industry are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shapir Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Shapir Engineering

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

The idea behind Citigroup and Shapir Engineering Industry 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 Global Correlations module to find global opportunities by holding instruments from different markets.