Correlation Between Citigroup and Grupo Mxico

Can any of the company-specific risk be diversified away by investing in both Citigroup and Grupo Mxico 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 Grupo Mxico into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Grupo Mxico SAB, you can compare the effects of market volatilities on Citigroup and Grupo Mxico 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 Grupo Mxico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Grupo Mxico.

Diversification Opportunities for Citigroup and Grupo Mxico

-0.22

Correlation Coefficient

Citigroup  Grupo Mxico

Very good diversification

The 3 months correlation between Citigroup and Grupo is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Grupo Mxico SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Mxico SAB 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 Grupo Mxico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Mxico SAB has no effect on the direction of Citigroup i.e., Citigroup and Grupo Mxico go up and down completely randomly.

Pair Corralation between Citigroup and Grupo Mxico

Given the investment horizon of 90 days Citigroup is expected to generate 1.55 times more return on investment than Grupo Mxico. However, Citigroup is 1.55 times more volatile than Grupo Mxico SAB. It trades about 0.26 of its potential returns per unit of risk. Grupo Mxico SAB is currently generating about -0.02 per unit of risk. If you would invest  126,609  in Citigroup on September 5, 2024 and sell it today you would earn a total of  18,691  from holding Citigroup or generate 14.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Grupo Mxico SAB

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Citigroup showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Mxico SAB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Mxico SAB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Grupo Mxico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Grupo Mxico

The main advantage of trading using opposite Citigroup and Grupo Mxico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Grupo Mxico 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 Grupo Mxico will offset losses from the drop in Grupo Mxico's long position.

The idea behind Citigroup and Grupo Mxico SAB 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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.