Correlation Between General Electric and Citigroup

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

Diversification Opportunities for General Electric and Citigroup

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between General and Citigroup is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding General Electric and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and General Electric 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 General Electric are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of General Electric i.e., General Electric and Citigroup go up and down completely randomly.

Pair Corralation between General Electric and Citigroup

Allowing for the 90-day total investment horizon General Electric is expected to generate 1.12 times more return on investment than Citigroup. However, General Electric is 1.12 times more volatile than Citigroup. It trades about 0.03 of its potential returns per unit of risk. Citigroup is currently generating about 0.02 per unit of risk. If you would invest  5,097  in General Electric on June 26, 2022 and sell it today you would earn a total of  1,358  from holding General Electric or generate 26.64% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  Citigroup

 Performance (%) 
       Timeline  
General Electric 
General Performance
0 of 100
Over the last 90 days General Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Citigroup 
Citigroup Performance
0 of 100
Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Citigroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citigroup Price Channel

General Electric and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Citigroup

The main advantage of trading using opposite General Electric and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric position performs unexpectedly, Citigroup 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 will offset losses from the drop in Citigroup's long position.
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The idea behind General Electric and Citigroup 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.
Citigroup vs. China Construction B
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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