Correlation Between Citigroup and TRACTOR SUPPLY

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

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

Diversification Opportunities for Citigroup and TRACTOR SUPPLY

0.45

Correlation Coefficient

Citigroup  TRACTOR SUPPLY

Very weak diversification

The 3 months correlation between Citigroup and TRACTOR is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and TRACTOR SUPPLY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACTOR SUPPLY 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 TRACTOR SUPPLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRACTOR SUPPLY has no effect on the direction of Citigroup i.e., Citigroup and TRACTOR SUPPLY go up and down completely randomly.

Pair Corralation between Citigroup and TRACTOR SUPPLY

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.5 times more return on investment than TRACTOR SUPPLY. However, Citigroup is 2.0 times less risky than TRACTOR SUPPLY. It trades about 0.19 of its potential returns per unit of risk. TRACTOR SUPPLY is currently generating about 0.02 per unit of risk. If you would invest  6,900  in Citigroup on September 19, 2024 and sell it today you would earn a total of  212.00  from holding Citigroup or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  TRACTOR SUPPLY

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.

TRACTOR SUPPLY

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TRACTOR SUPPLY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, TRACTOR SUPPLY is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and TRACTOR SUPPLY

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

The idea behind Citigroup and TRACTOR SUPPLY 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.