Correlation Between Citigroup and INITECH

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

By analyzing existing cross correlation between Citigroup and INITECH Co, you can compare the effects of market volatilities on Citigroup and INITECH 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 INITECH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and INITECH.

Diversification Opportunities for Citigroup and INITECH

0.74

Correlation Coefficient

Citigroup  INITECH

Poor diversification

The 3 months correlation between Citigroup and INITECH is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and INITECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INITECH 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 INITECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INITECH has no effect on the direction of Citigroup i.e., Citigroup and INITECH go up and down completely randomly.

Pair Corralation between Citigroup and INITECH

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.69 times more return on investment than INITECH. However, Citigroup is 1.46 times less risky than INITECH. It trades about 0.1 of its potential returns per unit of risk. INITECH Co is currently generating about -0.01 per unit of risk. If you would invest  4,609  in Citigroup on March 4, 2024 and sell it today you would earn a total of  1,622  from holding Citigroup or generate 35.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.58%
Values	Daily Returns

Citigroup  vs.  INITECH Co

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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 July 2024.

INITECH

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INITECH Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INITECH may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Citigroup and INITECH

The main advantage of trading using opposite Citigroup and INITECH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, INITECH 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 INITECH will offset losses from the drop in INITECH's long position.

The idea behind Citigroup and INITECH Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.