Correlation Between Jerusalem and Citigroup
Can any of the company-specific risk be diversified away by investing in both Jerusalem 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 Jerusalem and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jerusalem and Citigroup, you can compare the effects of market volatilities on Jerusalem 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 Jerusalem with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jerusalem and Citigroup.
Diversification Opportunities for Jerusalem and Citigroup
Poor diversification
The 3 months correlation between Jerusalem and Citigroup is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Jerusalem and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Jerusalem 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 Jerusalem 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 Jerusalem i.e., Jerusalem and Citigroup go up and down completely randomly.
Pair Corralation between Jerusalem and Citigroup
Assuming the 90 days trading horizon Jerusalem is expected to generate 1.05 times less return on investment than Citigroup. In addition to that, Jerusalem is 1.11 times more volatile than Citigroup. It trades about 0.08 of its total potential returns per unit of risk. Citigroup is currently generating about 0.1 per unit of volatility. If you would invest 4,466 in Citigroup on January 26, 2024 and sell it today you would earn a total of 1,781 from holding Citigroup or generate 39.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 78.65% |
| Values | Daily Returns |
Jerusalem vs. Citigroup
Performance |
| Timeline |
| Jerusalem |
| Citigroup |
Jerusalem and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jerusalem and Citigroup
The main advantage of trading using opposite Jerusalem and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jerusalem 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 Jerusalem 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.| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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