Correlation Between Apple and Citigroup

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

By analyzing existing cross correlation between Apple Inc and Citigroup, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Citigroup.

Diversification Opportunities for Apple and Citigroup

-0.84

Correlation Coefficient

Apple  Citigroup

Pay attention - limited upside

The 3 months correlation between Apple and Citigroup is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Apple 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 Apple Inc 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 Apple i.e., Apple and Citigroup go up and down completely randomly.

Pair Corralation between Apple and Citigroup

Given the investment horizon of 90 days Apple Inc is expected to under-perform the Citigroup. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.14 times less risky than Citigroup. The stock trades about -0.03 of its potential returns per unit of risk. The Citigroup is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,095  in Citigroup on January 25, 2024 and sell it today you would earn a total of  152.00  from holding Citigroup or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  Citigroup

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Apple and Citigroup

The main advantage of trading using opposite Apple and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.