Correlation Between Citigroup and Paychex

Can any of the company-specific risk be diversified away by investing in both Citigroup and Paychex 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 Paychex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Paychex, you can compare the effects of market volatilities on Citigroup and Paychex 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 Paychex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Paychex.

Diversification Opportunities for Citigroup and Paychex

-0.07

Correlation Coefficient

Citigroup  Paychex

Good diversification

The 3 months correlation between Citigroup and Paychex is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex 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 Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Citigroup i.e., Citigroup and Paychex go up and down completely randomly.

Pair Corralation between Citigroup and Paychex

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Paychex. In addition to that, Citigroup is 1.31 times more volatile than Paychex. It trades about -0.09 of its total potential returns per unit of risk. Paychex is currently generating about -0.08 per unit of volatility. If you would invest  12,162  in Paychex on February 1, 2024 and sell it today you would lose (281.00) from holding Paychex or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Paychex

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Paychex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paychex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Paychex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Paychex

The main advantage of trading using opposite Citigroup and Paychex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Paychex 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 Paychex will offset losses from the drop in Paychex's long position.

The idea behind Citigroup and Paychex 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.