Correlation Between Citigroup and Growth Opportunities

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

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

Diversification Opportunities for Citigroup and Growth Opportunities

0.92

Correlation Coefficient

Citigroup  Growth Opportunities

Almost no diversification

The 3 months correlation between Citigroup and Growth is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Growth Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Opportunities 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 Growth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Opportunities has no effect on the direction of Citigroup i.e., Citigroup and Growth Opportunities go up and down completely randomly.

Pair Corralation between Citigroup and Growth Opportunities

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.58 times more return on investment than Growth Opportunities. However, Citigroup is 1.58 times more volatile than Growth Opportunities Fund. It trades about 0.09 of its potential returns per unit of risk. Growth Opportunities Fund is currently generating about 0.05 per unit of risk. If you would invest  5,890  in Citigroup on September 19, 2024 and sell it today you would earn a total of  1,222  from holding Citigroup or generate 20.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.21%
Values	Daily Returns

Citigroup  vs.  Growth Opportunities Fund

Citigroup

Risk-Adjusted Performance

9 of 100

Good

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Growth Opportunities

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Growth Opportunities 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 Growth Opportunities

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

The idea behind Citigroup and Growth Opportunities Fund 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.