Correlation Between Citigroup and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Citigroup and Alcoa Corp 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 Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Alcoa Corp, you can compare the effects of market volatilities on Citigroup and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Alcoa Corp.
Diversification Opportunities for Citigroup and Alcoa Corp
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Citigroup and Alcoa is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Citigroup i.e., Citigroup and Alcoa Corp go up and down completely randomly.
Pair Corralation between Citigroup and Alcoa Corp
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.56 times more return on investment than Alcoa Corp. However, Citigroup is 1.8 times less risky than Alcoa Corp. It trades about 0.07 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.01 per unit of risk. If you would invest 4,413 in Citigroup on March 9, 2025 and sell it today you would earn a total of 3,413 from holding Citigroup or generate 77.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Alcoa Corp
Performance |
| Timeline |
| Citigroup |
| Alcoa Corp |
Citigroup and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Alcoa Corp
The main advantage of trading using opposite Citigroup and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Alcoa Corp vs. United States Steel | Alcoa Corp vs. Reliance Steel Aluminum | Alcoa Corp vs. ArcelorMittal SA ADR | Alcoa Corp vs. Commercial Metals |
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 the Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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