Correlation Between General American and Citigroup
Can any of the company-specific risk be diversified away by investing in both General American 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 General American and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General American Investors and Citigroup, you can compare the effects of market volatilities on General American 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 General American with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of General American and Citigroup.
Diversification Opportunities for General American and Citigroup
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between General and Citigroup is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and General American 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 General American Investors 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 General American i.e., General American and Citigroup go up and down completely randomly.
Pair Corralation between General American and Citigroup
Assuming the 90 days horizon General American Investors is expected to under-perform the Citigroup. But the mutual fund apears to be less risky and, when comparing its historical volatility, General American Investors is 2.37 times less risky than Citigroup. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Citigroup is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 6,275 in Citigroup on January 27, 2024 and sell it today you would lose (96.00) from holding Citigroup or give up 1.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General American Investors vs. Citigroup
Performance |
| Timeline |
| General American Inv |
| Citigroup |
General American and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with General American and Citigroup
The main advantage of trading using opposite General American and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American 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.| General American vs. Vanguard Total Stock | General American vs. Vanguard 500 Index | General American vs. Vanguard Total Stock | General American vs. Vanguard Total Stock |
| Citigroup vs. Aquagold International | Citigroup vs. Thrivent High Yield | Citigroup vs. Morningstar Unconstrained Allocation | Citigroup vs. Via Renewables |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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