Correlation Between Citigroup and TransAlta
Can any of the company-specific risk be diversified away by investing in both Citigroup and TransAlta 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 TransAlta into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and TransAlta, you can compare the effects of market volatilities on Citigroup and TransAlta 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 TransAlta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and TransAlta.
Diversification Opportunities for Citigroup and TransAlta
Poor diversification
The 3 months correlation between Citigroup and TransAlta is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta 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 TransAlta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta has no effect on the direction of Citigroup i.e., Citigroup and TransAlta go up and down completely randomly.
Pair Corralation between Citigroup and TransAlta
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.85 times less return on investment than TransAlta. But when comparing it to its historical volatility, Citigroup is 1.28 times less risky than TransAlta. It trades about 0.07 of its potential returns per unit of risk. TransAlta is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 645.00 in TransAlta on September 1, 2024 and sell it today you would earn a total of 401.00 from holding TransAlta or generate 62.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.18% |
| Values | Daily Returns |
Citigroup vs. TransAlta
Performance |
| Timeline |
| Citigroup |
| TransAlta |
Citigroup and TransAlta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and TransAlta
The main advantage of trading using opposite Citigroup and TransAlta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, TransAlta 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 TransAlta will offset losses from the drop in TransAlta's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| TransAlta vs. Perseus Mining Limited | TransAlta vs. MCEWEN MINING INC | TransAlta vs. Grupo Carso SAB | TransAlta vs. Commercial Vehicle Group |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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