Correlation Between Alcoa Corp and Citigroup
Can any of the company-specific risk be diversified away by investing in both Alcoa Corp and Citigroup 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 Alcoa Corp and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alcoa Corp and Citigroup, you can compare the effects of market volatilities on Alcoa Corp and Citigroup 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 Alcoa Corp with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alcoa Corp and Citigroup.
Diversification Opportunities for Alcoa Corp and Citigroup
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alcoa and Citigroup is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Alcoa Corp and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Alcoa Corp 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 Alcoa Corp are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Alcoa Corp i.e., Alcoa Corp and Citigroup go up and down completely randomly.
Pair Corralation between Alcoa Corp and Citigroup
Allowing for the 90-day total investment horizon Alcoa Corp is expected to under-perform the Citigroup. In addition to that, Alcoa Corp is 1.48 times more volatile than Citigroup. It trades about -0.11 of its total potential returns per unit of risk. Citigroup is currently generating about 0.45 per unit of volatility. If you would invest 6,994 in Citigroup on November 2, 2024 and sell it today you would earn a total of 1,192 from holding Citigroup or generate 17.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alcoa Corp vs. Citigroup
Performance |
| Timeline |
| Alcoa Corp |
| Citigroup |
Alcoa Corp and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alcoa Corp and Citigroup
The main advantage of trading using opposite Alcoa Corp and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alcoa Corp position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.| Alcoa Corp vs. Agnico Eagle Mines | Alcoa Corp vs. Pan American Silver | Alcoa Corp vs. Kinross Gold | Alcoa Corp vs. Newmont Goldcorp Corp |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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