Correlation Between Citigroup and American Beacon
Can any of the company-specific risk be diversified away by investing in both Citigroup and American Beacon 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 Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and American Beacon Balanced, you can compare the effects of market volatilities on Citigroup and American Beacon 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 Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and American Beacon.
Diversification Opportunities for Citigroup and American Beacon
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and American Beacon Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Balanced 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 Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Balanced has no effect on the direction of Citigroup i.e., Citigroup and American Beacon go up and down completely randomly.
Pair Corralation between Citigroup and American Beacon
Taking into account the 90-day investment horizon Citigroup is expected to generate 3.02 times more return on investment than American Beacon. However, Citigroup is 3.02 times more volatile than American Beacon Balanced. It trades about 0.1 of its potential returns per unit of risk. American Beacon Balanced is currently generating about 0.1 per unit of risk. If you would invest 4,357 in Citigroup on August 26, 2024 and sell it today you would earn a total of 2,627 from holding Citigroup or generate 60.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. American Beacon Balanced
Performance |
| Timeline |
| Citigroup |
| American Beacon Balanced |
Citigroup and American Beacon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and American Beacon
The main advantage of trading using opposite Citigroup and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, American Beacon 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 Beacon will offset losses from the drop in American Beacon's long position.| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
| American Beacon vs. American Beacon International | American Beacon vs. American Beacon Large | American Beacon vs. American Beacon Small | American Beacon vs. Dreyfus Opportunistic Midcap |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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