Correlation Between Citigroup and BG Foods

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

Diversification Opportunities for Citigroup and BG Foods

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citigroup and BGS is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Citigroup i.e., Citigroup and BG Foods go up and down completely randomly.

Pair Corralation between Citigroup and BG Foods

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.58 times more return on investment than BG Foods. However, Citigroup is 1.73 times less risky than BG Foods. It trades about 0.04 of its potential returns per unit of risk. BG Foods is currently generating about -0.03 per unit of risk. If you would invest  4,668  in Citigroup on December 29, 2023 and sell it today you would earn a total of  1,656  from holding Citigroup or generate 35.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  BG Foods

 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 unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
BG Foods 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, BG Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

Citigroup and BG Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and BG Foods

The main advantage of trading using opposite Citigroup and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.
The idea behind Citigroup and BG Foods 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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