Correlation Between Citigroup and Franklin Utilities
Can any of the company-specific risk be diversified away by investing in both Citigroup and Franklin Utilities 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 Franklin Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Franklin Utilities Fund, you can compare the effects of market volatilities on Citigroup and Franklin Utilities 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 Franklin Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Franklin Utilities.
Diversification Opportunities for Citigroup and Franklin Utilities
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities 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 Franklin Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of Citigroup i.e., Citigroup and Franklin Utilities go up and down completely randomly.
Pair Corralation between Citigroup and Franklin Utilities
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.9 times more return on investment than Franklin Utilities. However, Citigroup is 1.9 times more volatile than Franklin Utilities Fund. It trades about 0.21 of its potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.19 per unit of risk. If you would invest 6,360 in Citigroup on August 29, 2024 and sell it today you would earn a total of 615.00 from holding Citigroup or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Franklin Utilities Fund
Performance |
| Timeline |
| Citigroup |
| Franklin Utilities |
Citigroup and Franklin Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Franklin Utilities
The main advantage of trading using opposite Citigroup and Franklin Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Franklin Utilities 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 Franklin Utilities will offset losses from the drop in Franklin Utilities' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Franklin Utilities vs. John Hancock Financial | Franklin Utilities vs. Financials Ultrasector Profund | Franklin Utilities vs. Pimco Capital Sec | Franklin Utilities vs. Mesirow Financial Small |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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