Correlation Between Citigroup and Ross Stores

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

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

Diversification Opportunities for Citigroup and Ross Stores

-0.01

Correlation Coefficient

Citigroup  Ross Stores

Good diversification

The 3 months correlation between Citigroup and Ross is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Citigroup i.e., Citigroup and Ross Stores go up and down completely randomly.

Pair Corralation between Citigroup and Ross Stores

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.49 times more return on investment than Ross Stores. However, Citigroup is 1.49 times more volatile than Ross Stores. It trades about 0.17 of its potential returns per unit of risk. Ross Stores is currently generating about -0.05 per unit of risk. If you would invest  5,276  in Citigroup on January 24, 2024 and sell it today you would earn a total of  819.00  from holding Citigroup or generate 15.52% return on investment over 90 days.

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

Citigroup  vs.  Ross Stores

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Ross Stores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Ross Stores

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

The idea behind Citigroup and Ross Stores 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.