Correlation Between Citigroup and Faraday Copper

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

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

Diversification Opportunities for Citigroup and Faraday Copper

0.74

Correlation Coefficient

Citigroup  Faraday Copper

Poor diversification

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

Pair Corralation between Citigroup and Faraday Copper

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times less return on investment than Faraday Copper. But when comparing it to its historical volatility, Citigroup is 2.17 times less risky than Faraday Copper. It trades about 0.07 of its potential returns per unit of risk. Faraday Copper Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Faraday Copper Corp on August 24, 2024 and sell it today you would earn a total of  33.00  from holding Faraday Copper Corp or generate 57.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  Faraday Copper Corp

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Faraday Copper Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Copper Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Faraday Copper may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Citigroup and Faraday Copper

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

The idea behind Citigroup and Faraday Copper Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.