Correlation Between Citigroup and Arrow Home

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Arrow Home 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 Arrow Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Arrow Home Group, you can compare the effects of market volatilities on Citigroup and Arrow Home 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 Arrow Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Arrow Home.

Diversification Opportunities for Citigroup and Arrow Home

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citigroup and Arrow is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arrow Home Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Home Group 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 Arrow Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Home Group has no effect on the direction of Citigroup i.e., Citigroup and Arrow Home go up and down completely randomly.

Pair Corralation between Citigroup and Arrow Home

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.99 times more return on investment than Arrow Home. However, Citigroup is 1.01 times less risky than Arrow Home. It trades about 0.21 of its potential returns per unit of risk. Arrow Home Group is currently generating about -0.24 per unit of risk. If you would invest  6,360  in Citigroup on August 29, 2024 and sell it today you would earn a total of  615.00  from holding Citigroup or generate 9.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Arrow Home Group

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.
Arrow Home Group 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Home Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arrow Home sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup and Arrow Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Arrow Home

The main advantage of trading using opposite Citigroup and Arrow Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Arrow Home 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 Arrow Home will offset losses from the drop in Arrow Home's long position.
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The idea behind Citigroup and Arrow Home Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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