Correlation Between Citigroup and Smithson Investment
Can any of the company-specific risk be diversified away by investing in both Citigroup and Smithson Investment 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 Smithson Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Smithson Investment Trust, you can compare the effects of market volatilities on Citigroup and Smithson Investment 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 Smithson Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Smithson Investment.
Diversification Opportunities for Citigroup and Smithson Investment
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Smithson is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Smithson Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smithson Investment Trust 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 Smithson Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smithson Investment Trust has no effect on the direction of Citigroup i.e., Citigroup and Smithson Investment go up and down completely randomly.
Pair Corralation between Citigroup and Smithson Investment
Assuming the 90 days trading horizon Citigroup is expected to generate 1.24 times more return on investment than Smithson Investment. However, Citigroup is 1.24 times more volatile than Smithson Investment Trust. It trades about 0.09 of its potential returns per unit of risk. Smithson Investment Trust is currently generating about 0.02 per unit of risk. If you would invest 4,454 in Citigroup on September 12, 2024 and sell it today you would earn a total of 2,740 from holding Citigroup or generate 61.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.6% |
| Values | Daily Returns |
Citigroup vs. Smithson Investment Trust
Performance |
| Timeline |
| Citigroup |
| Smithson Investment Trust |
Citigroup and Smithson Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Smithson Investment
The main advantage of trading using opposite Citigroup and Smithson Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Smithson Investment 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 Smithson Investment will offset losses from the drop in Smithson Investment's long position.| Citigroup vs. Smithson Investment Trust | Citigroup vs. Blackrock World Mining | Citigroup vs. CNH Industrial NV | Citigroup vs. Aberdeen Diversified Income |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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