Correlation Between Citigroup and Capital Income
Can any of the company-specific risk be diversified away by investing in both Citigroup and Capital Income 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 Capital Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Capital Income Builder, you can compare the effects of market volatilities on Citigroup and Capital Income 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 Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Capital Income.
Diversification Opportunities for Citigroup and Capital Income
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Citigroup and Capital is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder 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 Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Citigroup i.e., Citigroup and Capital Income go up and down completely randomly.
Pair Corralation between Citigroup and Capital Income
Taking into account the 90-day investment horizon Citigroup is expected to generate 4.84 times more return on investment than Capital Income. However, Citigroup is 4.84 times more volatile than Capital Income Builder. It trades about 0.21 of its potential returns per unit of risk. Capital Income Builder is currently generating about -0.03 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Capital Income Builder
Performance |
| Timeline |
| Citigroup |
| Capital Income Builder |
Citigroup and Capital Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Capital Income
The main advantage of trading using opposite Citigroup and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Capital Income 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 Capital Income will offset losses from the drop in Capital Income's long position.The idea behind Citigroup and Capital Income Builder 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.| Capital Income vs. Income Fund Of | Capital Income vs. New World Fund | Capital Income vs. American Mutual Fund | Capital Income vs. American Mutual Fund |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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