Correlation Between Citigroup and Cape Lambert
Can any of the company-specific risk be diversified away by investing in both Citigroup and Cape Lambert 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 Cape Lambert into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Cape Lambert Resources, you can compare the effects of market volatilities on Citigroup and Cape Lambert 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 Cape Lambert. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Cape Lambert.
Diversification Opportunities for Citigroup and Cape Lambert
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Cape is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cape Lambert Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cape Lambert 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 Cape Lambert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cape Lambert Resources has no effect on the direction of Citigroup i.e., Citigroup and Cape Lambert go up and down completely randomly.
Pair Corralation between Citigroup and Cape Lambert
Taking into account the 90-day investment horizon Citigroup is expected to generate 16.15 times less return on investment than Cape Lambert. But when comparing it to its historical volatility, Citigroup is 15.59 times less risky than Cape Lambert. It trades about 0.19 of its potential returns per unit of risk. Cape Lambert Resources is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1.04 in Cape Lambert Resources on September 19, 2024 and sell it today you would earn a total of 0.46 from holding Cape Lambert Resources or generate 44.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Citigroup vs. Cape Lambert Resources
Performance |
| Timeline |
| Citigroup |
| Cape Lambert Resources |
Citigroup and Cape Lambert Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Cape Lambert
The main advantage of trading using opposite Citigroup and Cape Lambert positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Cape Lambert 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 Cape Lambert will offset losses from the drop in Cape Lambert's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Cape Lambert vs. Apple Inc | Cape Lambert vs. Apple Inc | Cape Lambert vs. Apple Inc | Cape Lambert vs. Apple Inc |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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