Correlation Between United Parcel and Citigroup

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

Diversification Opportunities for United Parcel and Citigroup

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between United and Citigroup is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and Citigroup go up and down completely randomly.

Pair Corralation between United Parcel and Citigroup

Considering the 90-day investment horizon United Parcel Service is expected to under-perform the Citigroup. In addition to that, United Parcel is 1.64 times more volatile than Citigroup. It trades about -0.05 of its total potential returns per unit of risk. Citigroup is currently generating about 0.28 per unit of volatility. If you would invest  5,360  in Citigroup on December 29, 2023 and sell it today you would earn a total of  915.00  from holding Citigroup or generate 17.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

United Parcel Service  vs.  Citigroup

 Performance 
       Timeline  
United Parcel Service 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United Parcel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
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 fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

United Parcel and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Parcel and Citigroup

The main advantage of trading using opposite United Parcel and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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.
The idea behind United Parcel Service and Citigroup 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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