Correlation Between Alphabet CDR and CITIGROUP CDR

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

By analyzing existing cross correlation between Alphabet CDR (CAD Hedged) and CITIGROUP CDR, you can compare the effects of market volatilities on Alphabet CDR and CITIGROUP CDR 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 Alphabet CDR with a short position of CITIGROUP CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet CDR and CITIGROUP CDR.

Diversification Opportunities for Alphabet CDR and CITIGROUP CDR

0.88

Correlation Coefficient

Alphabet CDR  CITIGROUP CDR

Very poor diversification

The 3 months correlation between Alphabet and CITIGROUP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet CDR (CAD Hedged) and CITIGROUP CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP CDR and Alphabet CDR 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 Alphabet CDR (CAD Hedged) are associated (or correlated) with CITIGROUP CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIGROUP CDR has no effect on the direction of Alphabet CDR i.e., Alphabet CDR and CITIGROUP CDR go up and down completely randomly.

Pair Corralation between Alphabet CDR and CITIGROUP CDR

Assuming the 90 days trading horizon Alphabet CDR is expected to generate 1.89 times less return on investment than CITIGROUP CDR. In addition to that, Alphabet CDR is 1.16 times more volatile than CITIGROUP CDR. It trades about 0.14 of its total potential returns per unit of risk. CITIGROUP CDR is currently generating about 0.31 per unit of volatility. If you would invest  2,955  in CITIGROUP CDR on May 3, 2025 and sell it today you would earn a total of  965.00  from holding CITIGROUP CDR or generate 32.66% return on investment over 90 days.

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

Alphabet CDR (CAD Hedged)  vs.  CITIGROUP CDR

Alphabet CDR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet CDR (CAD Hedged) are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Alphabet CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

CITIGROUP CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIGROUP CDR are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, CITIGROUP CDR exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet CDR and CITIGROUP CDR

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

The idea behind Alphabet CDR (CAD Hedged) and CITIGROUP CDR 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.