Correlation Between Citigroup and DRB Industrial
Can any of the company-specific risk be diversified away by investing in both Citigroup and DRB Industrial 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 DRB Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and DRB Industrial Co, you can compare the effects of market volatilities on Citigroup and DRB Industrial 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 DRB Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and DRB Industrial.
Diversification Opportunities for Citigroup and DRB Industrial
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and DRB is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DRB Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DRB Industrial 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 DRB Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DRB Industrial has no effect on the direction of Citigroup i.e., Citigroup and DRB Industrial go up and down completely randomly.
Pair Corralation between Citigroup and DRB Industrial
Taking into account the 90-day investment horizon Citigroup is expected to generate 3.1 times less return on investment than DRB Industrial. But when comparing it to its historical volatility, Citigroup is 1.39 times less risky than DRB Industrial. It trades about 0.07 of its potential returns per unit of risk. DRB Industrial Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 672,065 in DRB Industrial Co on October 12, 2024 and sell it today you would earn a total of 37,935 from holding DRB Industrial Co or generate 5.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Citigroup vs. DRB Industrial Co
Performance |
| Timeline |
| Citigroup |
| DRB Industrial |
Citigroup and DRB Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and DRB Industrial
The main advantage of trading using opposite Citigroup and DRB Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, DRB Industrial 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 DRB Industrial will offset losses from the drop in DRB Industrial's long position.| Citigroup vs. Royal Bank of | Citigroup vs. JPMorgan Chase Co | Citigroup vs. Nu Holdings | Citigroup vs. Canadian Imperial Bank |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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