Correlation Between Citigroup and PHILIP

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

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

Diversification Opportunities for Citigroup and PHILIP

-0.5

Correlation Coefficient

Citigroup  PHILIP

Very good diversification

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

Pair Corralation between Citigroup and PHILIP

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.42 times more return on investment than PHILIP. However, Citigroup is 2.39 times less risky than PHILIP. It trades about -0.09 of its potential returns per unit of risk. PHILIP MORRIS INTL is currently generating about -0.1 per unit of risk. If you would invest  7,075  in Citigroup on September 24, 2024 and sell it today you would lose (156.00) from holding Citigroup or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  PHILIP MORRIS INTL

Citigroup

Risk-Adjusted Performance

9 of 100

OK

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

PHILIP MORRIS INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHILIP MORRIS INTL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PHILIP MORRIS INTL investors.

Pair Trading with Citigroup and PHILIP

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

The idea behind Citigroup and PHILIP MORRIS INTL 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.