Correlation Between Citigroup and CLEARWATER

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

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

Diversification Opportunities for Citigroup and CLEARWATER

-0.05

Correlation Coefficient

Citigroup  CLEARWATER

Good diversification

The 3 months correlation between Citigroup and CLEARWATER is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CLEARWATER PAPER P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLEARWATER PAPER P 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 CLEARWATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLEARWATER PAPER P has no effect on the direction of Citigroup i.e., Citigroup and CLEARWATER go up and down completely randomly.

Pair Corralation between Citigroup and CLEARWATER

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.53 times more return on investment than CLEARWATER. However, Citigroup is 2.53 times more volatile than CLEARWATER PAPER P. It trades about 0.18 of its potential returns per unit of risk. CLEARWATER PAPER P is currently generating about -0.07 per unit of risk. If you would invest  5,788  in Citigroup on September 16, 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 Against
Strength	Insignificant
Accuracy	81.54%
Values	Daily Returns

Citigroup  vs.  CLEARWATER PAPER P

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.

CLEARWATER PAPER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CLEARWATER PAPER P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CLEARWATER 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 CLEARWATER

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

The idea behind Citigroup and CLEARWATER PAPER P 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.