Correlation Between Citigroup and Diversified International
Can any of the company-specific risk be diversified away by investing in both Citigroup and Diversified International 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 Diversified International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Diversified International Fund, you can compare the effects of market volatilities on Citigroup and Diversified International 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 Diversified International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Diversified International.
Diversification Opportunities for Citigroup and Diversified International
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Citigroup and Diversified is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Diversified International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified International 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 Diversified International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified International has no effect on the direction of Citigroup i.e., Citigroup and Diversified International go up and down completely randomly.
Pair Corralation between Citigroup and Diversified International
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.76 times more return on investment than Diversified International. However, Citigroup is 2.76 times more volatile than Diversified International Fund. It trades about 0.15 of its potential returns per unit of risk. Diversified International Fund is currently generating about -0.22 per unit of risk. If you would invest 6,133 in Citigroup on August 28, 2024 and sell it today you would earn a total of 842.00 from holding Citigroup or generate 13.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Diversified International Fund
Performance |
| Timeline |
| Citigroup |
| Diversified International |
Citigroup and Diversified International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Diversified International
The main advantage of trading using opposite Citigroup and Diversified International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Diversified International 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 Diversified International will offset losses from the drop in Diversified International's long position.The idea behind Citigroup and Diversified International Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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