Correlation Between Citigroup and Arweave

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

Diversification Opportunities for Citigroup and Arweave

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Citigroup and Arweave is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave 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 Arweave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arweave has no effect on the direction of Citigroup i.e., Citigroup and Arweave go up and down completely randomly.

Pair Corralation between Citigroup and Arweave

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.23 times more return on investment than Arweave. However, Citigroup is 4.33 times less risky than Arweave. It trades about 0.02 of its potential returns per unit of risk. Arweave is currently generating about -0.03 per unit of risk. If you would invest  4,759  in Citigroup on May 14, 2022 and sell it today you would earn a total of  679.00  from holding Citigroup or generate 14.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy42.86%
ValuesDaily Returns

Citigroup  vs.  Arweave

 Performance (%) 
       Timeline  
Citigroup 
Citigroup Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Citigroup sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup Price Channel

Arweave 
Arweave Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arweave are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arweave sustained solid returns over the last few months and may actually be approaching a breakup point.

Arweave Price Channel

Citigroup and Arweave Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Arweave

The main advantage of trading using opposite Citigroup and Arweave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Arweave 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 Arweave will offset losses from the drop in Arweave's long position.
The idea behind Citigroup and Arweave 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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