Correlation Between Citigroup and Eagle Financial

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

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

Diversification Opportunities for Citigroup and Eagle Financial

-0.2

Correlation Coefficient

Citigroup  Eagle Financial

Good diversification

The 3 months correlation between Citigroup and Eagle is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services 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 Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of Citigroup i.e., Citigroup and Eagle Financial go up and down completely randomly.

Pair Corralation between Citigroup and Eagle Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.07 times more return on investment than Eagle Financial. However, Citigroup is 4.07 times more volatile than Eagle Financial Services. It trades about 0.04 of its potential returns per unit of risk. Eagle Financial Services is currently generating about -0.19 per unit of risk. If you would invest  6,214  in Citigroup on July 22, 2024 and sell it today you would earn a total of  71.00  from holding Citigroup or generate 1.14% return on investment over 90 days.

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

Citigroup  vs.  Eagle Financial Services

Citigroup

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Eagle Financial Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Eagle Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and Eagle Financial

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

The idea behind Citigroup and Eagle Financial Services 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 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.