Correlation Between Citigroup and American Homes
Can any of the company-specific risk be diversified away by investing in both Citigroup and American Homes 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 American Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and American Homes 4, you can compare the effects of market volatilities on Citigroup and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and American Homes.
Diversification Opportunities for Citigroup and American Homes
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Citigroup and American is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Citigroup i.e., Citigroup and American Homes go up and down completely randomly.
Pair Corralation between Citigroup and American Homes
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.14 times more return on investment than American Homes. However, Citigroup is 1.14 times more volatile than American Homes 4. It trades about 0.07 of its potential returns per unit of risk. American Homes 4 is currently generating about 0.04 per unit of risk. If you would invest 4,206 in Citigroup on August 26, 2024 and sell it today you would earn a total of 2,778 from holding Citigroup or generate 66.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 82.9% |
| Values | Daily Returns |
Citigroup vs. American Homes 4
Performance |
| Timeline |
| Citigroup |
| American Homes 4 |
Citigroup and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and American Homes
The main advantage of trading using opposite Citigroup and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
| American Homes vs. Flutter Entertainment PLC | American Homes vs. Intermediate Capital Group | American Homes vs. MediaZest plc | American Homes vs. Greenroc Mining PLC |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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