Correlation Between Citigroup and Arrow DWA

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

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

Diversification Opportunities for Citigroup and Arrow DWA

0.38

Correlation Coefficient

Citigroup  Arrow DWA

Weak diversification

The 3 months correlation between Citigroup and Arrow is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arrow DWA Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow DWA Tactical 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 Arrow DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow DWA Tactical has no effect on the direction of Citigroup i.e., Citigroup and Arrow DWA go up and down completely randomly.

Pair Corralation between Citigroup and Arrow DWA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times less return on investment than Arrow DWA. In addition to that, Citigroup is 1.58 times more volatile than Arrow DWA Tactical. It trades about 0.1 of its total potential returns per unit of risk. Arrow DWA Tactical is currently generating about 0.22 per unit of volatility. If you would invest  1,057  in Arrow DWA Tactical on February 26, 2024 and sell it today you would earn a total of  36.00  from holding Arrow DWA Tactical or generate 3.41% 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.  Arrow DWA Tactical

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Arrow DWA Tactical

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow DWA Tactical are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arrow DWA is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Arrow DWA

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

The idea behind Citigroup and Arrow DWA Tactical 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.