Correlation Between Citigroup and Johnson Controls
Can any of the company-specific risk be diversified away by investing in both Citigroup and Johnson Controls 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 Johnson Controls into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Johnson Controls , you can compare the effects of market volatilities on Citigroup and Johnson Controls 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 Johnson Controls. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Johnson Controls.
Diversification Opportunities for Citigroup and Johnson Controls
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and Johnson is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Johnson Controls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Johnson Controls 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 Johnson Controls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Johnson Controls has no effect on the direction of Citigroup i.e., Citigroup and Johnson Controls go up and down completely randomly.
Pair Corralation between Citigroup and Johnson Controls
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.61 times less return on investment than Johnson Controls. But when comparing it to its historical volatility, Citigroup is 2.07 times less risky than Johnson Controls. It trades about 0.08 of its potential returns per unit of risk. Johnson Controls is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 104,880 in Johnson Controls on September 2, 2024 and sell it today you would earn a total of 82,240 from holding Johnson Controls or generate 78.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 97.58% |
| Values | Daily Returns |
Citigroup vs. Johnson Controls
Performance |
| Timeline |
| Citigroup |
| Johnson Controls |
Citigroup and Johnson Controls Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Johnson Controls
The main advantage of trading using opposite Citigroup and Johnson Controls positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Johnson Controls 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 Johnson Controls will offset losses from the drop in Johnson Controls' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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