Correlation Between Citigroup and Federal Home
Can any of the company-specific risk be diversified away by investing in both Citigroup and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Federal Home Loan, you can compare the effects of market volatilities on Citigroup and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Federal Home.
Diversification Opportunities for Citigroup and Federal Home
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Federal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of Citigroup i.e., Citigroup and Federal Home go up and down completely randomly.
Pair Corralation between Citigroup and Federal Home
Taking into account the 90-day investment horizon Citigroup is expected to generate 5.52 times less return on investment than Federal Home. But when comparing it to its historical volatility, Citigroup is 3.07 times less risky than Federal Home. It trades about 0.06 of its potential returns per unit of risk. Federal Home Loan is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 45.00 in Federal Home Loan on August 27, 2024 and sell it today you would earn a total of 265.00 from holding Federal Home Loan or generate 588.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Federal Home Loan
Performance |
| Timeline |
| Citigroup |
| Federal Home Loan |
Citigroup and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Federal Home
The main advantage of trading using opposite Citigroup and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
| Federal Home vs. Encore Capital Group | Federal Home vs. CNFinance Holdings | Federal Home vs. Greystone Housing Impact | Federal Home vs. Rocket Companies |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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