Correlation Between Caterpillar and Citigroup

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Caterpillar and Citigroup 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 Caterpillar and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caterpillar and Citigroup, you can compare the effects of market volatilities on Caterpillar and Citigroup 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 Caterpillar with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caterpillar and Citigroup.

Diversification Opportunities for Caterpillar and Citigroup

CaterpillarCitigroupDiversified AwayCaterpillarCitigroupDiversified Away100%
-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Caterpillar and Citigroup is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Caterpillar 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 Caterpillar are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Caterpillar i.e., Caterpillar and Citigroup go up and down completely randomly.

Pair Corralation between Caterpillar and Citigroup

Assuming the 90 days trading horizon Caterpillar is expected to under-perform the Citigroup. But the stock apears to be less risky and, when comparing its historical volatility, Caterpillar is 1.01 times less risky than Citigroup. The stock trades about -0.14 of its potential returns per unit of risk. The Citigroup is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  143,482  in Citigroup on November 26, 2024 and sell it today you would earn a total of  20,518  from holding Citigroup or generate 14.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Caterpillar  vs.  Citigroup

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -505101520
JavaScript chart by amCharts 3.21.15CAT C
       Timeline  
Caterpillar 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb6,8007,0007,2007,4007,6007,8008,0008,2008,400
Citigroup 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Citigroup showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1,4001,4501,5001,5501,6001,6501,700

Caterpillar and Citigroup Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.87-2.15-1.43-0.710.00.661.321.982.64 0.060.080.100.120.14
JavaScript chart by amCharts 3.21.15CAT C
       Returns  

Pair Trading with Caterpillar and Citigroup

The main advantage of trading using opposite Caterpillar and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caterpillar position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.
The idea behind Caterpillar and Citigroup 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.
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

Other Complementary Tools

Portfolio Analyzer
Portfolio analysis module that provides access to portfolio diagnostics and optimization engine
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Money Managers
Screen money managers from public funds and ETFs managed around the world
Bonds Directory
Find actively traded corporate debentures issued by US companies
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity