Correlation Between Citigroup and Ambev SA

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

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

Diversification Opportunities for Citigroup and Ambev SA

-0.26

Correlation Coefficient

Citigroup  Ambev SA

Very good diversification

The 3 months correlation between Citigroup and Ambev is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ambev SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA has no effect on the direction of Citigroup i.e., Citigroup and Ambev SA go up and down completely randomly.

Pair Corralation between Citigroup and Ambev SA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times less return on investment than Ambev SA. But when comparing it to its historical volatility, Citigroup is 2.07 times less risky than Ambev SA. It trades about 0.02 of its potential returns per unit of risk. Ambev SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  196.00  in Ambev SA on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Ambev SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Ambev SA

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 rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ambev SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambev SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ambev SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Ambev SA

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

The idea behind Citigroup and Ambev SA 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.