Correlation Between Citigroup and CompoSecure

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

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

Diversification Opportunities for Citigroup and CompoSecure

0.86

Correlation Coefficient

Citigroup  CompoSecure

Very poor diversification

The 3 months correlation between Citigroup and CompoSecure is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Citigroup i.e., Citigroup and CompoSecure go up and down completely randomly.

Pair Corralation between Citigroup and CompoSecure

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.84 times more return on investment than CompoSecure. However, Citigroup is 1.19 times less risky than CompoSecure. It trades about 0.38 of its potential returns per unit of risk. CompoSecure is currently generating about 0.25 per unit of risk. If you would invest  6,784  in Citigroup on April 30, 2025 and sell it today you would earn a total of  2,728  from holding Citigroup or generate 40.2% return on investment over 90 days.

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

Citigroup  vs.  CompoSecure

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.

CompoSecure

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, CompoSecure displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and CompoSecure

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

The idea behind Citigroup and CompoSecure 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.