Correlation Between Citigroup and Ford

Can any of the company-specific risk be diversified away by investing in both Citigroup and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Ford Motor, you can compare the effects of market volatilities on Citigroup and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Ford.

Diversification Opportunities for Citigroup and Ford

0.49

Correlation Coefficient

Citigroup  Ford

Very weak diversification

The 3 months correlation between Citigroup and Ford is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Citigroup i.e., Citigroup and Ford go up and down completely randomly.

Pair Corralation between Citigroup and Ford

Given the investment horizon of 90 days Citigroup is expected to generate 0.71 times more return on investment than Ford. However, Citigroup is 1.41 times less risky than Ford. It trades about 0.0 of its potential returns per unit of risk. Ford Motor is currently generating about -0.08 per unit of risk. If you would invest  104,165  in Citigroup on February 2, 2024 and sell it today you would lose (464.00) from holding Citigroup or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Ford Motor

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Ford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Ford

The main advantage of trading using opposite Citigroup and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.

The idea behind Citigroup and Ford Motor 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.