Correlation Between Cisco Systems and Citigroup

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

Diversification Opportunities for Cisco Systems and Citigroup

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Cisco and Citigroup is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and Citigroup go up and down completely randomly.

Pair Corralation between Cisco Systems and Citigroup

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.92 times more return on investment than Citigroup. However, Cisco Systems is 1.09 times less risky than Citigroup. It trades about -0.38 of its potential returns per unit of risk. Citigroup is currently generating about -0.44 per unit of risk. If you would invest  4,529  in Cisco Systems on July 3, 2022 and sell it today you would lose (529.00)  from holding Cisco Systems or give up 11.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Citigroup

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cisco 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 latest conflicting performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Citigroup Price Channel

Cisco Systems and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Citigroup

The main advantage of trading using opposite Cisco Systems and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.
Cisco Systems vs. Amazon Inc
The idea behind Cisco Systems 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. Amazon Inc
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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