Correlation Between Verizon Communications and Citigroup

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

Diversification Opportunities for Verizon Communications and Citigroup

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Verizon and Citigroup is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Citigroup go up and down completely randomly.

Pair Corralation between Verizon Communications and Citigroup

Allowing for the 90-day total investment horizon Verizon Communications is expected to generate 0.78 times more return on investment than Citigroup. However, Verizon Communications is 1.28 times less risky than Citigroup. It trades about -0.25 of its potential returns per unit of risk. Citigroup is currently generating about -0.28 per unit of risk. If you would invest  4,495  in Verizon Communications on July 6, 2022 and sell it today you would lose (579.00)  from holding Verizon Communications or give up 12.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Verizon Communications  vs.  Citigroup

 Performance (%) 
       Timeline  
Verizon Communications 
Verizon Performance
0 of 100
Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Verizon 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

Verizon Communications and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verizon Communications and Citigroup

The main advantage of trading using opposite Verizon Communications and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.
Verizon Communications vs. Amazon Inc
The idea behind Verizon Communications 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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