Correlation Between Citigroup and Franklin Mutual

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

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

Diversification Opportunities for Citigroup and Franklin Mutual

0.14

Correlation Coefficient

Citigroup  Franklin Mutual

Average diversification

The 3 months correlation between Citigroup and Franklin is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Franklin Mutual Quest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Mutual Quest 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 Franklin Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Mutual Quest has no effect on the direction of Citigroup i.e., Citigroup and Franklin Mutual go up and down completely randomly.

Pair Corralation between Citigroup and Franklin Mutual

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times more return on investment than Franklin Mutual. However, Citigroup is 1.39 times more volatile than Franklin Mutual Quest. It trades about 0.02 of its potential returns per unit of risk. Franklin Mutual Quest is currently generating about -0.42 per unit of risk. If you would invest  7,075  in Citigroup on September 25, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Franklin Mutual Quest

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Franklin Mutual Quest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Mutual Quest has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Citigroup and Franklin Mutual

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

The idea behind Citigroup and Franklin Mutual Quest 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.