Correlation Between Citigroup and Morningstar Unconstrained

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

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

Diversification Opportunities for Citigroup and Morningstar Unconstrained

0.74

Correlation Coefficient

Citigroup  Morningstar Unconstrained

Poor diversification

The 3 months correlation between Citigroup and Morningstar is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Morningstar Unconstrained Allo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Unconstrained 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 Morningstar Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Unconstrained has no effect on the direction of Citigroup i.e., Citigroup and Morningstar Unconstrained go up and down completely randomly.

Pair Corralation between Citigroup and Morningstar Unconstrained

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times less return on investment than Morningstar Unconstrained. In addition to that, Citigroup is 1.76 times more volatile than Morningstar Unconstrained Allocation. It trades about 0.05 of its total potential returns per unit of risk. Morningstar Unconstrained Allocation is currently generating about 0.11 per unit of volatility. If you would invest  1,075  in Morningstar Unconstrained Allocation on February 29, 2024 and sell it today you would earn a total of  16.00  from holding Morningstar Unconstrained Allocation or generate 1.49% return on investment over 90 days.

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

Citigroup  vs.  Morningstar Unconstrained Allo

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Morningstar Unconstrained

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Unconstrained Allocation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Morningstar Unconstrained 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 Morningstar Unconstrained

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

The idea behind Citigroup and Morningstar Unconstrained Allocation 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.