Correlation Between Citigroup and International Business
Can any of the company-specific risk be diversified away by investing in both Citigroup and International Business 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 International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and International Business Machines, you can compare the effects of market volatilities on Citigroup and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and International Business.
Diversification Opportunities for Citigroup and International Business
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and International is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Citigroup i.e., Citigroup and International Business go up and down completely randomly.
Pair Corralation between Citigroup and International Business
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.01 times less return on investment than International Business. But when comparing it to its historical volatility, Citigroup is 1.63 times less risky than International Business. It trades about 0.37 of its potential returns per unit of risk. International Business Machines is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 21,975 in International Business Machines on November 11, 2024 and sell it today you would earn a total of 3,259 from holding International Business Machines or generate 14.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. International Business Machine
Performance |
| Timeline |
| Citigroup |
| International Business |
Citigroup and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and International Business
The main advantage of trading using opposite Citigroup and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| International Business vs. EPAM Systems | International Business vs. Infosys Ltd ADR | International Business vs. Cognizant Technology Solutions | International Business vs. FiscalNote Holdings |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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