Correlation Between Citigroup and Archer Daniels

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

Diversification Opportunities for Citigroup and Archer Daniels

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Citigroup and Archer is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Archer-Daniels-Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer-Daniels-Midland 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 Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer-Daniels-Midland has no effect on the direction of Citigroup i.e., Citigroup and Archer Daniels go up and down completely randomly.

Pair Corralation between Citigroup and Archer Daniels

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.9 times more return on investment than Archer Daniels. However, Citigroup is 1.11 times less risky than Archer Daniels. It trades about 0.06 of its potential returns per unit of risk. Archer Daniels Midland is currently generating about 0.0 per unit of risk. If you would invest  4,350  in Citigroup on December 29, 2023 and sell it today you would earn a total of  1,925  from holding Citigroup or generate 44.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Archer-Daniels-Midland

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Archer-Daniels-Midland 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Citigroup and Archer Daniels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Archer Daniels

The main advantage of trading using opposite Citigroup and Archer Daniels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Archer Daniels 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 Archer Daniels will offset losses from the drop in Archer Daniels' long position.
The idea behind Citigroup and Archer Daniels Midland 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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