Correlation Between Citigroup and Putnam Municipal

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Putnam Municipal 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 Putnam Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Putnam Municipal Opportunities, you can compare the effects of market volatilities on Citigroup and Putnam Municipal 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 Putnam Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Putnam Municipal.

Diversification Opportunities for Citigroup and Putnam Municipal

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Citigroup and Putnam is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Putnam Municipal Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Municipal Opp 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 Putnam Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Municipal Opp has no effect on the direction of Citigroup i.e., Citigroup and Putnam Municipal go up and down completely randomly.

Pair Corralation between Citigroup and Putnam Municipal

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.62 times more return on investment than Putnam Municipal. However, Citigroup is 1.62 times more volatile than Putnam Municipal Opportunities. It trades about 0.07 of its potential returns per unit of risk. Putnam Municipal Opportunities is currently generating about 0.01 per unit of risk. If you would invest  4,206  in Citigroup on August 26, 2024 and sell it today you would earn a total of  2,778  from holding Citigroup or generate 66.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Putnam Municipal Opportunities

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Putnam Municipal Opp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Putnam Municipal Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Putnam Municipal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Citigroup and Putnam Municipal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Putnam Municipal

The main advantage of trading using opposite Citigroup and Putnam Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Putnam Municipal 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 Putnam Municipal will offset losses from the drop in Putnam Municipal's long position.
The idea behind Citigroup and Putnam Municipal Opportunities 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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