Correlation Between American Mutual and Citigroup
Can any of the company-specific risk be diversified away by investing in both American Mutual and Citigroup 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 American Mutual and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Mutual Fund and Citigroup, you can compare the effects of market volatilities on American Mutual and Citigroup 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 American Mutual with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Mutual and Citigroup.
Diversification Opportunities for American Mutual and Citigroup
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Citigroup is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and American Mutual 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 American Mutual Fund are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of American Mutual i.e., American Mutual and Citigroup go up and down completely randomly.
Pair Corralation between American Mutual and Citigroup
Assuming the 90 days horizon American Mutual is expected to generate 2.45 times less return on investment than Citigroup. But when comparing it to its historical volatility, American Mutual Fund is 2.22 times less risky than Citigroup. It trades about 0.04 of its potential returns per unit of risk. Citigroup is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,756 in Citigroup on January 25, 2024 and sell it today you would earn a total of 1,511 from holding Citigroup or generate 31.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
American Mutual Fund vs. Citigroup
Performance |
Timeline |
American Mutual |
Citigroup |
American Mutual and Citigroup Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Mutual and Citigroup
The main advantage of trading using opposite American Mutual and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.American Mutual vs. American Funds Fundamental | American Mutual vs. Amcap Fund Class | American Mutual vs. New Perspective Fund | American Mutual vs. American Balanced Fund |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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