Correlation Between Citigroup and Extended Market
Can any of the company-specific risk be diversified away by investing in both Citigroup and Extended Market 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 Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Extended Market Index, you can compare the effects of market volatilities on Citigroup and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Extended Market.
Diversification Opportunities for Citigroup and Extended Market
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and Extended is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Citigroup i.e., Citigroup and Extended Market go up and down completely randomly.
Pair Corralation between Citigroup and Extended Market
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.18 times more return on investment than Extended Market. However, Citigroup is 2.18 times more volatile than Extended Market Index. It trades about 0.41 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.19 per unit of risk. If you would invest 7,039 in Citigroup on November 1, 2024 and sell it today you would earn a total of 1,147 from holding Citigroup or generate 16.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Citigroup vs. Extended Market Index
Performance |
| Timeline |
| Citigroup |
| Extended Market Index |
Citigroup and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Extended Market
The main advantage of trading using opposite Citigroup and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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