Correlation Between Citigroup and LOOM
Can any of the company-specific risk be diversified away by investing in both Citigroup and LOOM 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 LOOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and LOOM, you can compare the effects of market volatilities on Citigroup and LOOM 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 LOOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and LOOM.
Diversification Opportunities for Citigroup and LOOM
Poor diversification
The 3 months correlation between Citigroup and LOOM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LOOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOOM 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 LOOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOOM has no effect on the direction of Citigroup i.e., Citigroup and LOOM go up and down completely randomly.
Pair Corralation between Citigroup and LOOM
Taking into account the 90-day investment horizon Citigroup is expected to generate 3.11 times less return on investment than LOOM. But when comparing it to its historical volatility, Citigroup is 3.53 times less risky than LOOM. It trades about 0.23 of its potential returns per unit of risk. LOOM is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5.31 in LOOM on August 27, 2024 and sell it today you would earn a total of 1.53 from holding LOOM or generate 28.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. LOOM
Performance |
| Timeline |
| Citigroup |
| LOOM |
Citigroup and LOOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and LOOM
The main advantage of trading using opposite Citigroup and LOOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, LOOM 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 LOOM will offset losses from the drop in LOOM's long position.| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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