Correlation Between Citigroup and EMC Public
Can any of the company-specific risk be diversified away by investing in both Citigroup and EMC Public 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 EMC Public into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and EMC Public, you can compare the effects of market volatilities on Citigroup and EMC Public 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 EMC Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and EMC Public.
Diversification Opportunities for Citigroup and EMC Public
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Citigroup and EMC is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and EMC Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMC Public 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 EMC Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMC Public has no effect on the direction of Citigroup i.e., Citigroup and EMC Public go up and down completely randomly.
Pair Corralation between Citigroup and EMC Public
Taking into account the 90-day investment horizon Citigroup is expected to generate 55.21 times less return on investment than EMC Public. But when comparing it to its historical volatility, Citigroup is 46.25 times less risky than EMC Public. It trades about 0.07 of its potential returns per unit of risk. EMC Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6.00 in EMC Public on August 28, 2024 and sell it today you would earn a total of 2.00 from holding EMC Public or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.6% |
| Values | Daily Returns |
Citigroup vs. EMC Public
Performance |
| Timeline |
| Citigroup |
| EMC Public |
Citigroup and EMC Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and EMC Public
The main advantage of trading using opposite Citigroup and EMC Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, EMC Public 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 EMC Public will offset losses from the drop in EMC Public's long position.The idea behind Citigroup and EMC Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EMC Public vs. Tata Steel Public | EMC Public vs. Thaifoods Group Public | EMC Public vs. TMT Steel Public | EMC Public vs. The Erawan Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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