Correlation Between Citigroup and 00440FAA2

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Can any of the company-specific risk be diversified away by investing in both Citigroup and 00440FAA2 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 00440FAA2 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and ACE CAP TR, you can compare the effects of market volatilities on Citigroup and 00440FAA2 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 00440FAA2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and 00440FAA2.

Diversification Opportunities for Citigroup and 00440FAA2

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Citigroup and 00440FAA2 is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ACE CAP TR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACE CAP TR 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 00440FAA2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACE CAP TR has no effect on the direction of Citigroup i.e., Citigroup and 00440FAA2 go up and down completely randomly.

Pair Corralation between Citigroup and 00440FAA2

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.3 times more return on investment than 00440FAA2. However, Citigroup is 2.3 times more volatile than ACE CAP TR. It trades about 0.25 of its potential returns per unit of risk. ACE CAP TR is currently generating about -0.12 per unit of risk. If you would invest  6,360  in Citigroup on August 28, 2024 and sell it today you would earn a total of  715.00  from holding Citigroup or generate 11.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy68.18%
ValuesDaily Returns

Citigroup  vs.  ACE CAP TR

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
ACE CAP TR 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ACE CAP TR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 00440FAA2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citigroup and 00440FAA2 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and 00440FAA2

The main advantage of trading using opposite Citigroup and 00440FAA2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, 00440FAA2 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 00440FAA2 will offset losses from the drop in 00440FAA2's long position.
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The idea behind Citigroup and ACE CAP TR 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.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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