Correlation Between Citigroup and Constellation Software
Can any of the company-specific risk be diversified away by investing in both Citigroup and Constellation Software 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 Constellation Software into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Constellation Software, you can compare the effects of market volatilities on Citigroup and Constellation Software 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 Constellation Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Constellation Software.
Diversification Opportunities for Citigroup and Constellation Software
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Constellation is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Constellation Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Software 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 Constellation Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Software has no effect on the direction of Citigroup i.e., Citigroup and Constellation Software go up and down completely randomly.
Pair Corralation between Citigroup and Constellation Software
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.08 times less return on investment than Constellation Software. In addition to that, Citigroup is 1.23 times more volatile than Constellation Software. It trades about 0.08 of its total potential returns per unit of risk. Constellation Software is currently generating about 0.11 per unit of volatility. If you would invest 191,102 in Constellation Software on August 31, 2024 and sell it today you would earn a total of 127,898 from holding Constellation Software or generate 66.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.16% |
| Values | Daily Returns |
Citigroup vs. Constellation Software
Performance |
| Timeline |
| Citigroup |
| Constellation Software |
Citigroup and Constellation Software Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Constellation Software
The main advantage of trading using opposite Citigroup and Constellation Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Constellation Software 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 Constellation Software will offset losses from the drop in Constellation Software's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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