Correlation Between Citigroup and Best Buy

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

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

Diversification Opportunities for Citigroup and Best Buy

0.9

Correlation Coefficient

Citigroup  Best Buy

Almost no diversification

The 3 months correlation between Citigroup and Best is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Citigroup i.e., Citigroup and Best Buy go up and down completely randomly.

Pair Corralation between Citigroup and Best Buy

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Best Buy. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.21 times less risky than Best Buy. The stock trades about -0.08 of its potential returns per unit of risk. The Best Buy Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,620  in Best Buy Co on January 18, 2024 and sell it today you would earn a total of  3.00  from holding Best Buy Co or generate 0.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Best Buy 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 May 2024.

Best Buy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Best Buy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Citigroup and Best Buy

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

The idea behind Citigroup and Best Buy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.