Correlation Between Citigroup and Metro One

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

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

Diversification Opportunities for Citigroup and Metro One

0.08

Correlation Coefficient

Citigroup  Metro One

Significant diversification

The 3 months correlation between Citigroup and Metro is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Metro One Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro One Telecommun 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 Metro One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro One Telecommun has no effect on the direction of Citigroup i.e., Citigroup and Metro One go up and down completely randomly.

Pair Corralation between Citigroup and Metro One

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.1 times more return on investment than Metro One. However, Citigroup is 9.58 times less risky than Metro One. It trades about 0.07 of its potential returns per unit of risk. Metro One Telecommunications is currently generating about 0.01 per unit of risk. If you would invest  4,218  in Citigroup on September 2, 2024 and sell it today you would earn a total of  2,869  from holding Citigroup or generate 68.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	8.06%
Values	Daily Returns

Citigroup  vs.  Metro One Telecommunications

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Metro One Telecommun

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro One Telecommunications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Metro One is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and Metro One

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

The idea behind Citigroup and Metro One Telecommunications 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.