Correlation Between Citigroup and Shopify
Can any of the company-specific risk be diversified away by investing in both Citigroup and Shopify 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 Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Shopify, you can compare the effects of market volatilities on Citigroup and Shopify 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 Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Shopify.
Diversification Opportunities for Citigroup and Shopify
Very poor diversification
The 3 months correlation between Citigroup and Shopify is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Citigroup i.e., Citigroup and Shopify go up and down completely randomly.
Pair Corralation between Citigroup and Shopify
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.3 times less return on investment than Shopify. But when comparing it to its historical volatility, Citigroup is 2.16 times less risky than Shopify. It trades about 0.06 of its potential returns per unit of risk. Shopify is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,306 in Shopify on August 23, 2024 and sell it today you would earn a total of 6,342 from holding Shopify or generate 147.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Shopify
Performance |
| Timeline |
| Citigroup |
| Shopify |
Citigroup and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Shopify
The main advantage of trading using opposite Citigroup and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.| Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Royal Bank of | Citigroup vs. JPMorgan Chase Co |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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