Correlation Between Citigroup and Arch Capital

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

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

Diversification Opportunities for Citigroup and Arch Capital

-0.67

Correlation Coefficient

Citigroup  Arch Capital

Excellent diversification

The 3 months correlation between Citigroup and Arch is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group 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 Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of Citigroup i.e., Citigroup and Arch Capital go up and down completely randomly.

Pair Corralation between Citigroup and Arch Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.97 times more return on investment than Arch Capital. However, Citigroup is 1.03 times less risky than Arch Capital. It trades about 0.37 of its potential returns per unit of risk. Arch Capital Group is currently generating about -0.04 per unit of risk. If you would invest  6,760  in Citigroup on May 1, 2025 and sell it today you would earn a total of  2,688  from holding Citigroup or generate 39.76% return on investment over 90 days.

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

Citigroup  vs.  Arch Capital Group

Citigroup

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arch Capital Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arch Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Arch Capital is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and Arch Capital

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

The idea behind Citigroup and Arch Capital Group 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.