Correlation Between Citigroup and Pershing Square

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

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

Diversification Opportunities for Citigroup and Pershing Square

0.2

Correlation Coefficient

Citigroup  Pershing Square

Modest diversification

The 3 months correlation between Citigroup and Pershing is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pershing Square Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pershing Square Holdings 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 Pershing Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pershing Square Holdings has no effect on the direction of Citigroup i.e., Citigroup and Pershing Square go up and down completely randomly.

Pair Corralation between Citigroup and Pershing Square

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.93 times less return on investment than Pershing Square. But when comparing it to its historical volatility, Citigroup is 1.42 times less risky than Pershing Square. It trades about 0.2 of its potential returns per unit of risk. Pershing Square Holdings is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  4,521  in Pershing Square Holdings on September 16, 2024 and sell it today you would earn a total of  450.00  from holding Pershing Square Holdings or generate 9.95% return on investment over 90 days.

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

Citigroup  vs.  Pershing Square Holdings

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Pershing Square Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pershing Square Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pershing Square may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Pershing Square

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

The idea behind Citigroup and Pershing Square Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.