Correlation Between Citigroup and Check Point

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

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

Diversification Opportunities for Citigroup and Check Point

-0.43

Correlation Coefficient

Citigroup  Check Point

Very good diversification

The 3 months correlation between Citigroup and Check is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Check Point Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Check Point Software 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 Check Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Check Point Software has no effect on the direction of Citigroup i.e., Citigroup and Check Point go up and down completely randomly.

Pair Corralation between Citigroup and Check Point

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than Check Point. However, Citigroup is 1.65 times less risky than Check Point. It trades about 0.25 of its potential returns per unit of risk. Check Point Software is currently generating about -0.16 per unit of risk. If you would invest  6,360  in Citigroup on August 27, 2024 and sell it today you would earn a total of  715.00  from holding Citigroup or generate 11.24% return on investment over 90 days.

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

Citigroup  vs.  Check Point Software

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Check Point Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Check Point Software has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Check Point is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Check Point

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

The idea behind Citigroup and Check Point Software 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 CEOs Directory module to screen CEOs from public companies around the world.