Correlation Between Verizon Communications and Citigroup
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Citigroup, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Citigroup.
Diversification Opportunities for Verizon Communications and Citigroup
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Verizon and Citigroup is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Citigroup go up and down completely randomly.
Pair Corralation between Verizon Communications and Citigroup
Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the Citigroup. In addition to that, Verizon Communications is 1.07 times more volatile than Citigroup. It trades about -0.2 of its total potential returns per unit of risk. Citigroup is currently generating about 0.07 per unit of volatility. If you would invest 7,186 in Citigroup on October 13, 2024 and sell it today you would earn a total of 114.00 from holding Citigroup or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Citigroup
Performance |
| Timeline |
| Verizon Communications |
| Citigroup |
Verizon Communications and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Citigroup
The main advantage of trading using opposite Verizon Communications and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. T Mobile | Verizon Communications vs. Vodafone Group Public | Verizon Communications vs. Lumen Technologies, |
| Citigroup vs. Tres Tentos Agroindustrial | Citigroup vs. The Home Depot | Citigroup vs. Bemobi Mobile Tech | Citigroup vs. Brpr Corporate Offices |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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