Correlation Between Citigroup and Target
Can any of the company-specific risk be diversified away by investing in both Citigroup and Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Target, you can compare the effects of market volatilities on Citigroup and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Target.
Diversification Opportunities for Citigroup and Target
Almost no diversification
The 3 months correlation between Citigroup and Target is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Citigroup i.e., Citigroup and Target go up and down completely randomly.
Pair Corralation between Citigroup and Target
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.75 times more return on investment than Target. However, Citigroup is 1.33 times less risky than Target. It trades about 0.04 of its potential returns per unit of risk. Target is currently generating about -0.01 per unit of risk. If you would invest 4,515 in Citigroup on January 20, 2024 and sell it today you would earn a total of 1,317 from holding Citigroup or generate 29.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Citigroup vs. Target
Performance |
| Timeline |
| Citigroup |
| Target |
Citigroup and Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Target
The main advantage of trading using opposite Citigroup and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Target vs. Aquagold International | Target vs. Morningstar Unconstrained Allocation | Target vs. Thrivent High Yield | Target vs. Via Renewables |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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