Correlation Between American International and Citigroup
Can any of the company-specific risk be diversified away by investing in both American International 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 American International and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American International Group and Citigroup, you can compare the effects of market volatilities on American International 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 American International with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of American International and Citigroup.
Diversification Opportunities for American International and Citigroup
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and Citigroup is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding American International Group and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and American International 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 American International Group 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 American International i.e., American International and Citigroup go up and down completely randomly.
Pair Corralation between American International and Citigroup
Considering the 90-day investment horizon American International is expected to generate 1.18 times less return on investment than Citigroup. But when comparing it to its historical volatility, American International Group is 1.09 times less risky than Citigroup. It trades about 0.04 of its potential returns per unit of risk. Citigroup is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,756 in Citigroup on January 25, 2024 and sell it today you would earn a total of 1,511 from holding Citigroup or generate 31.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American International Group vs. Citigroup
Performance |
| Timeline |
| American International |
| Citigroup |
American International and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American International and Citigroup
The main advantage of trading using opposite American International and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American International 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.| American International vs. Axa Equitable Holdings | American International vs. Arch Capital Group | American International vs. Old Republic International | American International vs. Sun Life Financial |
| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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