Correlation Between Citigroup and Alpha Architect

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

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

Diversification Opportunities for Citigroup and Alpha Architect

0.82

Correlation Coefficient

Citigroup  Alpha Architect

Very poor diversification

The 3 months correlation between Citigroup and Alpha is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alpha Architect High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect High 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 Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect High has no effect on the direction of Citigroup i.e., Citigroup and Alpha Architect go up and down completely randomly.

Pair Corralation between Citigroup and Alpha Architect

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.87 times more return on investment than Alpha Architect. However, Citigroup is 6.87 times more volatile than Alpha Architect High. It trades about 0.37 of its potential returns per unit of risk. Alpha Architect High is currently generating about 0.1 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Alpha Architect High

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.

Alpha Architect High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect High are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Alpha Architect

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

The idea behind Citigroup and Alpha Architect High 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.