Correlation Between Citigroup and Build A
Can any of the company-specific risk be diversified away by investing in both Citigroup and Build A 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 Build A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Build A Bear Workshop, you can compare the effects of market volatilities on Citigroup and Build A 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 Build A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Build A.
Diversification Opportunities for Citigroup and Build A
Poor diversification
The 3 months correlation between Citigroup and Build is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Build A Bear Workshop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Build A Bear 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 Build A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Build A Bear has no effect on the direction of Citigroup i.e., Citigroup and Build A go up and down completely randomly.
Pair Corralation between Citigroup and Build A
Taking into account the 90-day investment horizon Citigroup is expected to generate 6.56 times less return on investment than Build A. But when comparing it to its historical volatility, Citigroup is 7.52 times less risky than Build A. It trades about 0.19 of its potential returns per unit of risk. Build A Bear Workshop is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,689 in Build A Bear Workshop on September 18, 2024 and sell it today you would earn a total of 680.50 from holding Build A Bear Workshop or generate 18.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Build A Bear Workshop
Performance |
| Timeline |
| Citigroup |
| Build A Bear |
Citigroup and Build A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Build A
The main advantage of trading using opposite Citigroup and Build A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Build A 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 Build A will offset losses from the drop in Build A's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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