Correlation Between Citigroup and Baker Steel
Can any of the company-specific risk be diversified away by investing in both Citigroup and Baker Steel 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 Baker Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Baker Steel Resources, you can compare the effects of market volatilities on Citigroup and Baker Steel 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 Baker Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Baker Steel.
Diversification Opportunities for Citigroup and Baker Steel
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Baker is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources 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 Baker Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Citigroup i.e., Citigroup and Baker Steel go up and down completely randomly.
Pair Corralation between Citigroup and Baker Steel
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.1 times more return on investment than Baker Steel. However, Citigroup is 1.1 times more volatile than Baker Steel Resources. It trades about 0.07 of its potential returns per unit of risk. Baker Steel Resources is currently generating about 0.03 per unit of risk. If you would invest 6,079 in Citigroup on August 31, 2024 and sell it today you would earn a total of 1,008 from holding Citigroup or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.45% |
| Values | Daily Returns |
Citigroup vs. Baker Steel Resources
Performance |
| Timeline |
| Citigroup |
| Baker Steel Resources |
Citigroup and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Baker Steel
The main advantage of trading using opposite Citigroup and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Baker Steel 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 Baker Steel will offset losses from the drop in Baker Steel's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Baker Steel vs. One Media iP | Baker Steel vs. Associated British Foods | Baker Steel vs. Hollywood Bowl Group | Baker Steel vs. Liberty Media Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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