Correlation Between Citigroup and DAIMLERCHRYSLER

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

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

Diversification Opportunities for Citigroup and DAIMLERCHRYSLER

-0.5

Correlation Coefficient

Citigroup  DAIMLERCHRYSLER

Very good diversification

The 3 months correlation between Citigroup and DAIMLERCHRYSLER is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DAIMLERCHRYSLER NORTH AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIMLERCHRYSLER NORTH 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 DAIMLERCHRYSLER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIMLERCHRYSLER NORTH has no effect on the direction of Citigroup i.e., Citigroup and DAIMLERCHRYSLER go up and down completely randomly.

Pair Corralation between Citigroup and DAIMLERCHRYSLER

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.87 times more return on investment than DAIMLERCHRYSLER. However, Citigroup is 1.87 times more volatile than DAIMLERCHRYSLER NORTH AMER. It trades about 0.1 of its potential returns per unit of risk. DAIMLERCHRYSLER NORTH AMER is currently generating about 0.04 per unit of risk. If you would invest  6,203  in Citigroup on September 23, 2024 and sell it today you would earn a total of  716.00  from holding Citigroup or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  DAIMLERCHRYSLER NORTH AMER

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 unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DAIMLERCHRYSLER NORTH

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DAIMLERCHRYSLER NORTH AMER are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DAIMLERCHRYSLER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and DAIMLERCHRYSLER

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

The idea behind Citigroup and DAIMLERCHRYSLER NORTH AMER 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.