Correlation Between Citigroup and Alphabet
Can any of the company-specific risk be diversified away by investing in both Citigroup and Alphabet 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 Alphabet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Alphabet Inc Class C, you can compare the effects of market volatilities on Citigroup and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Alphabet.
Diversification Opportunities for Citigroup and Alphabet
Very weak diversification
The 3 months correlation between Citigroup and Alphabet is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of Citigroup i.e., Citigroup and Alphabet go up and down completely randomly.
Pair Corralation between Citigroup and Alphabet
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.9 times less return on investment than Alphabet. In addition to that, Citigroup is 1.28 times more volatile than Alphabet Inc Class C. It trades about 0.09 of its total potential returns per unit of risk. Alphabet Inc Class C is currently generating about 0.21 per unit of volatility. If you would invest 15,115 in Alphabet Inc Class C on January 24, 2024 and sell it today you would earn a total of 877.00 from holding Alphabet Inc Class C or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Alphabet Inc Class C
Performance |
| Timeline |
| Citigroup |
| Alphabet Class C |
Citigroup and Alphabet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Alphabet
The main advantage of trading using opposite Citigroup and Alphabet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Alphabet 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 Alphabet will offset losses from the drop in Alphabet'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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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