Correlation Between Citigroup and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both Citigroup and Alpha Architect 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 Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Alpha Architect Value, you can compare the effects of market volatilities on Citigroup and Alpha Architect 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 Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Alpha Architect.
Diversification Opportunities for Citigroup and Alpha Architect
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Alpha is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alpha Architect Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Value 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 Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Value has no effect on the direction of Citigroup i.e., Citigroup and Alpha Architect go up and down completely randomly.
Pair Corralation between Citigroup and Alpha Architect
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.52 times more return on investment than Alpha Architect. However, Citigroup is 1.52 times more volatile than Alpha Architect Value. It trades about 0.07 of its potential returns per unit of risk. Alpha Architect Value is currently generating about 0.03 per unit of risk. If you would invest 4,206 in Citigroup on August 26, 2024 and sell it today you would earn a total of 2,778 from holding Citigroup or generate 66.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Alpha Architect Value
Performance |
| Timeline |
| Citigroup |
| Alpha Architect Value |
Citigroup and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Alpha Architect
The main advantage of trading using opposite Citigroup and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Alpha Architect 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 Alpha Architect will offset losses from the drop in Alpha Architect's long position.| Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal |
| Alpha Architect vs. WisdomTree 9060 Balanced | Alpha Architect vs. RPAR Risk Parity | Alpha Architect vs. Cambria Tail Risk | Alpha Architect vs. Aptus Defined Risk |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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