Correlation Between Citigroup and TCM Public

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

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

Diversification Opportunities for Citigroup and TCM Public

-0.8

Correlation Coefficient

Citigroup  TCM Public

Pay attention - limited upside

The 3 months correlation between Citigroup and TCM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and TCM Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCM Public 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 TCM Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCM Public has no effect on the direction of Citigroup i.e., Citigroup and TCM Public go up and down completely randomly.

Pair Corralation between Citigroup and TCM Public

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.59 times more return on investment than TCM Public. However, Citigroup is 1.69 times less risky than TCM Public. It trades about 0.18 of its potential returns per unit of risk. TCM Public is currently generating about -0.09 per unit of risk. If you would invest  5,788  in Citigroup on September 16, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Citigroup  vs.  TCM Public

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

TCM Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TCM Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Citigroup and TCM Public

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

The idea behind Citigroup and TCM Public 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.