Correlation Between Citigroup and Source SP

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

By analyzing existing cross correlation between Citigroup and Source SP 500, you can compare the effects of market volatilities on Citigroup and Source SP 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 Source SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Source SP.

Diversification Opportunities for Citigroup and Source SP

0.91

Correlation Coefficient

Citigroup  Source SP

Almost no diversification

The 3 months correlation between Citigroup and Source is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Source SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source SP 500 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 Source SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source SP 500 has no effect on the direction of Citigroup i.e., Citigroup and Source SP go up and down completely randomly.

Pair Corralation between Citigroup and Source SP

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.08 times more return on investment than Source SP. However, Citigroup is 2.08 times more volatile than Source SP 500. It trades about 0.11 of its potential returns per unit of risk. Source SP 500 is currently generating about 0.12 per unit of risk. If you would invest  4,567  in Citigroup on September 28, 2024 and sell it today you would earn a total of  2,508  from holding Citigroup or generate 54.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.26%
Values	Daily Returns

Citigroup  vs.  Source SP 500

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.

Source SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Source SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Source SP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Source SP

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

The idea behind Citigroup and Source SP 500 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.