Correlation Between Citigroup and LeaderSharesTM AlphaFactor
Can any of the company-specific risk be diversified away by investing in both Citigroup and LeaderSharesTM AlphaFactor 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 LeaderSharesTM AlphaFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and LeaderSharesTM AlphaFactor Core, you can compare the effects of market volatilities on Citigroup and LeaderSharesTM AlphaFactor 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 LeaderSharesTM AlphaFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and LeaderSharesTM AlphaFactor.
Diversification Opportunities for Citigroup and LeaderSharesTM AlphaFactor
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and LeaderSharesTM is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LeaderSharesTM AlphaFactor Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LeaderSharesTM AlphaFactor 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 LeaderSharesTM AlphaFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LeaderSharesTM AlphaFactor has no effect on the direction of Citigroup i.e., Citigroup and LeaderSharesTM AlphaFactor go up and down completely randomly.
Pair Corralation between Citigroup and LeaderSharesTM AlphaFactor
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.01 times more return on investment than LeaderSharesTM AlphaFactor. However, Citigroup is 2.01 times more volatile than LeaderSharesTM AlphaFactor Core. It trades about 0.21 of its potential returns per unit of risk. LeaderSharesTM AlphaFactor Core is currently generating about 0.29 per unit of risk. If you would invest 6,360 in Citigroup on August 29, 2024 and sell it today you would earn a total of 615.00 from holding Citigroup or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. LeaderSharesTM AlphaFactor Cor
Performance |
| Timeline |
| Citigroup |
| LeaderSharesTM AlphaFactor |
Citigroup and LeaderSharesTM AlphaFactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and LeaderSharesTM AlphaFactor
The main advantage of trading using opposite Citigroup and LeaderSharesTM AlphaFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, LeaderSharesTM AlphaFactor 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 LeaderSharesTM AlphaFactor will offset losses from the drop in LeaderSharesTM AlphaFactor's long position.The idea behind Citigroup and LeaderSharesTM AlphaFactor Core pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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