Correlation Between Citigroup and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both Citigroup and Tower Semiconductor 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 Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Tower Semiconductor, you can compare the effects of market volatilities on Citigroup and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Tower Semiconductor.
Diversification Opportunities for Citigroup and Tower Semiconductor
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Tower is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Citigroup i.e., Citigroup and Tower Semiconductor go up and down completely randomly.
Pair Corralation between Citigroup and Tower Semiconductor
Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.33 times less risky than Tower Semiconductor. The stock trades about -0.1 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,210,000 in Tower Semiconductor on January 20, 2024 and sell it today you would lose (19,000) from holding Tower Semiconductor or give up 1.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.48% |
| Values | Daily Returns |
Citigroup vs. Tower Semiconductor
Performance |
| Timeline |
| Citigroup |
| Tower Semiconductor |
Citigroup and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Tower Semiconductor
The main advantage of trading using opposite Citigroup and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Tower Semiconductor vs. Automatic Bank Services | Tower Semiconductor vs. EN Shoham Business | Tower Semiconductor vs. Rapac Communication Infrastructure | Tower Semiconductor vs. Tadiran Hldg |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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