Correlation Between Citigroup and URU Metals

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

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

Diversification Opportunities for Citigroup and URU Metals

0.6

Correlation Coefficient

Citigroup  URU Metals

Poor diversification

The 3 months correlation between Citigroup and URU is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU Metals 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 URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of Citigroup i.e., Citigroup and URU Metals go up and down completely randomly.

Pair Corralation between Citigroup and URU Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.15 times less return on investment than URU Metals. But when comparing it to its historical volatility, Citigroup is 2.54 times less risky than URU Metals. It trades about 0.09 of its potential returns per unit of risk. URU Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,500  in URU Metals on September 21, 2024 and sell it today you would earn a total of  2,500  from holding URU Metals or generate 18.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  URU Metals

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

URU Metals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in URU Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, URU Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and URU Metals

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

The idea behind Citigroup and URU Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.