Correlation Between Citigroup and Spectra7 Microsystems

Can any of the company-specific risk be diversified away by investing in both Citigroup and Spectra7 Microsystems 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 Spectra7 Microsystems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Spectra7 Microsystems, you can compare the effects of market volatilities on Citigroup and Spectra7 Microsystems 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 Spectra7 Microsystems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Spectra7 Microsystems.

Diversification Opportunities for Citigroup and Spectra7 Microsystems

0.33

Correlation Coefficient

Citigroup  Spectra7 Microsystems

Weak diversification

The 3 months correlation between Citigroup and Spectra7 is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Spectra7 Microsystems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectra7 Microsystems 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 Spectra7 Microsystems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectra7 Microsystems has no effect on the direction of Citigroup i.e., Citigroup and Spectra7 Microsystems go up and down completely randomly.

Pair Corralation between Citigroup and Spectra7 Microsystems

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.11 times more return on investment than Spectra7 Microsystems. However, Citigroup is 9.05 times less risky than Spectra7 Microsystems. It trades about 0.02 of its potential returns per unit of risk. Spectra7 Microsystems is currently generating about -0.12 per unit of risk. If you would invest  7,075  in Citigroup on September 26, 2024 and sell it today you would earn a total of  25.00  from holding Citigroup or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Citigroup  vs.  Spectra7 Microsystems

Citigroup

Risk-Adjusted Performance

10 of 100

Good

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.

Spectra7 Microsystems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spectra7 Microsystems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Spectra7 Microsystems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Spectra7 Microsystems

The main advantage of trading using opposite Citigroup and Spectra7 Microsystems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Spectra7 Microsystems 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 Spectra7 Microsystems will offset losses from the drop in Spectra7 Microsystems' long position.

The idea behind Citigroup and Spectra7 Microsystems 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.