Correlation Between Consumer Discretionary and CitiGroup
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and CitiGroup 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 Consumer Discretionary and CitiGroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Discretionary Select and CitiGroup, you can compare the effects of market volatilities on Consumer Discretionary and CitiGroup 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 Consumer Discretionary with a short position of CitiGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and CitiGroup.
Diversification Opportunities for Consumer Discretionary and CitiGroup
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Consumer and CitiGroup is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and CitiGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CitiGroup and Consumer Discretionary 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 Consumer Discretionary Select are associated (or correlated) with CitiGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CitiGroup has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and CitiGroup go up and down completely randomly.
Pair Corralation between Consumer Discretionary and CitiGroup
If you would invest (100.00) in CitiGroup on January 25, 2024 and sell it today you would earn a total of 100.00 from holding CitiGroup or generate -100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Consumer Discretionary Select vs. CitiGroup
Performance |
| Timeline |
| Consumer Discretionary |
| CitiGroup |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Consumer Discretionary and CitiGroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and CitiGroup
The main advantage of trading using opposite Consumer Discretionary and CitiGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, CitiGroup 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 CitiGroup will offset losses from the drop in CitiGroup's long position.The idea behind Consumer Discretionary Select and CitiGroup 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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