Correlation Between Citigroup and Ultrashort Latin

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

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

Diversification Opportunities for Citigroup and Ultrashort Latin

0.76

Correlation Coefficient

Citigroup  Ultrashort Latin

Poor diversification

The 3 months correlation between Citigroup and Ultrashort is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ultrashort Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Latin America 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 Ultrashort Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Latin America has no effect on the direction of Citigroup i.e., Citigroup and Ultrashort Latin go up and down completely randomly.

Pair Corralation between Citigroup and Ultrashort Latin

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.68 times less return on investment than Ultrashort Latin. But when comparing it to its historical volatility, Citigroup is 2.42 times less risky than Ultrashort Latin. It trades about 0.06 of its potential returns per unit of risk. Ultrashort Latin America is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,929  in Ultrashort Latin America on September 21, 2024 and sell it today you would earn a total of  632.00  from holding Ultrashort Latin America or generate 16.09% return on investment over 90 days.

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

Citigroup  vs.  Ultrashort Latin America

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ultrashort Latin America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Latin America are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Latin showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Ultrashort Latin

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

The idea behind Citigroup and Ultrashort Latin America 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.