Correlation Between Citigroup and Franklin

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

By analyzing existing cross correlation between Citigroup and Franklin K2 Alternative, you can compare the effects of market volatilities on Citigroup and Franklin 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 Franklin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Franklin.

Diversification Opportunities for Citigroup and Franklin

0.92

Correlation Coefficient

Citigroup  Franklin

Almost no diversification

The 3 months correlation between Citigroup and Franklin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Franklin K2 Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin K2 Alternative 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 Franklin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin K2 Alternative has no effect on the direction of Citigroup i.e., Citigroup and Franklin go up and down completely randomly.

Pair Corralation between Citigroup and Franklin

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Franklin. In addition to that, Citigroup is 7.16 times more volatile than Franklin K2 Alternative. It trades about -0.1 of its total potential returns per unit of risk. Franklin K2 Alternative is currently generating about 0.04 per unit of volatility. If you would invest  1,139  in Franklin K2 Alternative on January 20, 2024 and sell it today you would earn a total of  2.00  from holding Franklin K2 Alternative or generate 0.18% return on investment over 90 days.

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

Citigroup  vs.  Franklin K2 Alternative

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.

Franklin K2 Alternative

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin K2 Alternative are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Franklin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Franklin

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

The idea behind Citigroup and Franklin K2 Alternative 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.

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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.