Correlation Between Citigroup and American Express

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Can any of the company-specific risk be diversified away by investing in both Citigroup and American Express 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 American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and American Express, you can compare the effects of market volatilities on Citigroup and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and American Express.

Diversification Opportunities for Citigroup and American Express

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Citigroup and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Citigroup i.e., Citigroup and American Express go up and down completely randomly.

Pair Corralation between Citigroup and American Express

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the American Express. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.15 times less risky than American Express. The stock trades about -0.03 of its potential returns per unit of risk. The American Express is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  16,973  in American Express on October 30, 2022 and sell it today you would earn a total of  258.00  from holding American Express or generate 1.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  American Express

 Performance (%) 
       Timeline  
Citigroup 
Citigroup Performance
10 of 100
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. Despite somewhat weak fundamental indicators, Citigroup sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup Price Channel

American Express 
American Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, American Express displayed solid returns over the last few months and may actually be approaching a breakup point.

American Price Channel

Citigroup and American Express Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and American Express

The main advantage of trading using opposite Citigroup and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.
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The idea behind Citigroup and American Express 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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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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