Correlation Between Citigroup and Tax Free

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

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

Diversification Opportunities for Citigroup and Tax Free

0.89

Correlation Coefficient

Citigroup  Tax Free

Very poor diversification

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

Pair Corralation between Citigroup and Tax Free

Taking into account the 90-day investment horizon Citigroup is expected to generate 34.25 times more return on investment than Tax Free. However, Citigroup is 34.25 times more volatile than Tax Free Conservative. It trades about 0.18 of its potential returns per unit of risk. Tax Free Conservative is currently generating about 0.17 per unit of risk. If you would invest  5,788  in Citigroup on September 15, 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Tax Free Conservative

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.

Tax Free Conservative

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Free Conservative are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax Free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Tax Free

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

The idea behind Citigroup and Tax Free Conservative 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.