Correlation Between Citigroup and Ford
Can any of the company-specific risk be diversified away by investing in both Citigroup and Ford 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 Ford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Ford Motor, you can compare the effects of market volatilities on Citigroup and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Ford.
Diversification Opportunities for Citigroup and Ford
Very poor diversification
The 3 months correlation between Citigroup and Ford is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Citigroup i.e., Citigroup and Ford go up and down completely randomly.
Pair Corralation between Citigroup and Ford
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.66 times more return on investment than Ford. However, Citigroup is 1.52 times less risky than Ford. It trades about 0.09 of its potential returns per unit of risk. Ford Motor is currently generating about 0.03 per unit of risk. If you would invest 4,481 in Citigroup on January 21, 2024 and sell it today you would earn a total of 1,433 from holding Citigroup or generate 31.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Ford Motor
Performance |
| Timeline |
| Citigroup |
| Ford Motor |
Citigroup and Ford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Ford
The main advantage of trading using opposite Citigroup and Ford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Ford 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 Ford will offset losses from the drop in Ford's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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