Correlation Between Citigroup and US Financial

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

By analyzing existing cross correlation between Citigroup and US Financial 15, you can compare the effects of market volatilities on Citigroup and US Financial 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 US Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and US Financial.

Diversification Opportunities for Citigroup and US Financial

0.83

Correlation Coefficient

Citigroup  US Financial

Very poor diversification

The 3 months correlation between Citigroup and FTU is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and US Financial 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Financial 15 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 US Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Financial 15 has no effect on the direction of Citigroup i.e., Citigroup and US Financial go up and down completely randomly.

Pair Corralation between Citigroup and US Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.83 times less return on investment than US Financial. But when comparing it to its historical volatility, Citigroup is 3.88 times less risky than US Financial. It trades about 0.05 of its potential returns per unit of risk. US Financial 15 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  34.00  in US Financial 15 on February 13, 2024 and sell it today you would earn a total of  3.00  from holding US Financial 15 or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.78%
Values	Daily Returns

Citigroup  vs.  US Financial 15

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

US Financial 15

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Financial 15 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, US Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and US Financial

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

The idea behind Citigroup and US Financial 15 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..