Correlation Between Smithson Investment and Citigroup
Can any of the company-specific risk be diversified away by investing in both Smithson Investment 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 Smithson Investment and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smithson Investment Trust and Citigroup, you can compare the effects of market volatilities on Smithson Investment 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 Smithson Investment with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smithson Investment and Citigroup.
Diversification Opportunities for Smithson Investment and Citigroup
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smithson and Citigroup is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Smithson Investment Trust and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Smithson Investment 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 Smithson Investment Trust 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 Smithson Investment i.e., Smithson Investment and Citigroup go up and down completely randomly.
Pair Corralation between Smithson Investment and Citigroup
Assuming the 90 days trading horizon Smithson Investment is expected to generate 2.06 times less return on investment than Citigroup. But when comparing it to its historical volatility, Smithson Investment Trust is 2.01 times less risky than Citigroup. It trades about 0.09 of its potential returns per unit of risk. Citigroup is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,913 in Citigroup on September 13, 2024 and sell it today you would earn a total of 1,250 from holding Citigroup or generate 21.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smithson Investment Trust vs. Citigroup
Performance |
| Timeline |
| Smithson Investment Trust |
| Citigroup |
Smithson Investment and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smithson Investment and Citigroup
The main advantage of trading using opposite Smithson Investment and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smithson Investment 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.| Smithson Investment vs. Ecclesiastical Insurance Office | Smithson Investment vs. Jacquet Metal Service | Smithson Investment vs. Dalata Hotel Group | Smithson Investment vs. Central Asia Metals |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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