Correlation Between Citigroup and Royce Small-cap
Can any of the company-specific risk be diversified away by investing in both Citigroup and Royce Small-cap 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 Royce Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Royce Small Cap Value, you can compare the effects of market volatilities on Citigroup and Royce Small-cap 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 Royce Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Royce Small-cap.
Diversification Opportunities for Citigroup and Royce Small-cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Royce is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Royce Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Small Cap 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 Royce Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Royce Small-cap go up and down completely randomly.
Pair Corralation between Citigroup and Royce Small-cap
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.24 times more return on investment than Royce Small-cap. However, Citigroup is 1.24 times more volatile than Royce Small Cap Value. It trades about 0.21 of its potential returns per unit of risk. Royce Small Cap Value is currently generating about 0.2 per unit of risk. If you would invest 6,393 in Citigroup on August 31, 2024 and sell it today you would earn a total of 623.00 from holding Citigroup or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Royce Small Cap Value
Performance |
| Timeline |
| Citigroup |
| Royce Small Cap |
Citigroup and Royce Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Royce Small-cap
The main advantage of trading using opposite Citigroup and Royce Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Royce Small-cap 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 Royce Small-cap will offset losses from the drop in Royce Small-cap's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Royce Small-cap vs. Davis Financial Fund | Royce Small-cap vs. Fidelity Advisor Financial | Royce Small-cap vs. John Hancock Financial | Royce Small-cap vs. 1919 Financial Services |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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