Correlation Between Amazon and Citigroup

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

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

Diversification Opportunities for Amazon and Citigroup

0.81

Correlation Coefficient

Amazon  Citigroup

Very poor diversification

The 3 months correlation between Amazon and Citigroup is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Amazon 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 Amazon 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 Amazon i.e., Amazon and Citigroup go up and down completely randomly.

Pair Corralation between Amazon and Citigroup

Given the investment horizon of 90 days Amazon Inc is expected to generate 0.72 times more return on investment than Citigroup. However, Amazon Inc is 1.39 times less risky than Citigroup. It trades about 0.03 of its potential returns per unit of risk. Citigroup is currently generating about -0.1 per unit of risk. If you would invest  17,815  in Amazon Inc on January 20, 2024 and sell it today you would earn a total of  107.00  from holding Amazon Inc or generate 0.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Amazon Inc  vs.  Citigroup

Amazon Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Amazon and Citigroup

The main advantage of trading using opposite Amazon and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon 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 Amazon 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.