Correlation Between Citigroup and DENT
Can any of the company-specific risk be diversified away by investing in both Citigroup and DENT 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 DENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and DENT, you can compare the effects of market volatilities on Citigroup and DENT 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 DENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and DENT.
Diversification Opportunities for Citigroup and DENT
Poor diversification
The 3 months correlation between Citigroup and DENT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENT 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 DENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENT has no effect on the direction of Citigroup i.e., Citigroup and DENT go up and down completely randomly.
Pair Corralation between Citigroup and DENT
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.34 times more return on investment than DENT. However, Citigroup is 2.98 times less risky than DENT. It trades about 0.12 of its potential returns per unit of risk. DENT is currently generating about 0.01 per unit of risk. If you would invest 4,445 in Citigroup on August 26, 2024 and sell it today you would earn a total of 2,539 from holding Citigroup or generate 57.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 54.22% |
| Values | Daily Returns |
Citigroup vs. DENT
Performance |
| Timeline |
| Citigroup |
| DENT |
Citigroup and DENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and DENT
The main advantage of trading using opposite Citigroup and DENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, DENT 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 DENT will offset losses from the drop in DENT's long position.| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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