Correlation Between Citigroup and Goldman Sachs

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

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

Diversification Opportunities for Citigroup and Goldman Sachs

0.87

Correlation Coefficient

Citigroup  Goldman Sachs

Very poor diversification

The 3 months correlation between Citigroup and Goldman is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Goldman Sachs High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs High 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs High has no effect on the direction of Citigroup i.e., Citigroup and Goldman Sachs go up and down completely randomly.

Pair Corralation between Citigroup and Goldman Sachs

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.34 times more return on investment than Goldman Sachs. However, Citigroup is 10.34 times more volatile than Goldman Sachs High. It trades about 0.05 of its potential returns per unit of risk. Goldman Sachs High is currently generating about 0.17 per unit of risk. If you would invest  6,166  in Citigroup on January 26, 2024 and sell it today you would earn a total of  81.00  from holding Citigroup or generate 1.31% return on investment over 90 days.

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

Citigroup  vs.  Goldman Sachs High

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Goldman Sachs High

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs High are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Goldman Sachs is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Goldman Sachs

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

The idea behind Citigroup and Goldman Sachs High 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.