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

0.89

Correlation Coefficient

General American  Citigroup

Very poor diversification

The 3 months correlation between General and Citigroup is 0.89. 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 2.2 times less risky than Citigroup. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Citigroup is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,173  in Citigroup on February 6, 2024 and sell it today you would lose (21.00) from holding Citigroup or give up 0.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

General American Investors  vs.  Citigroup

General American Inv

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General American Investors are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, General American is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind General American Investors and Citigroup 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.