Correlation Between Citigroup and Sovereign Metals

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Sovereign Metals 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 Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Sovereign Metals, you can compare the effects of market volatilities on Citigroup and Sovereign Metals 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 Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Sovereign Metals.

Diversification Opportunities for Citigroup and Sovereign Metals

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Citigroup and Sovereign is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Citigroup i.e., Citigroup and Sovereign Metals go up and down completely randomly.

Pair Corralation between Citigroup and Sovereign Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.5 times more return on investment than Sovereign Metals. However, Citigroup is 2.0 times less risky than Sovereign Metals. It trades about 0.05 of its potential returns per unit of risk. Sovereign Metals is currently generating about 0.02 per unit of risk. If you would invest  9,339  in Citigroup on July 22, 2025 and sell it today you would earn a total of  368.00  from holding Citigroup or generate 3.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Sovereign Metals

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

Mild

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Sovereign Metals 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sovereign Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Citigroup and Sovereign Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Sovereign Metals

The main advantage of trading using opposite Citigroup and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Sovereign Metals 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.
The idea behind Citigroup and Sovereign Metals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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