Correlation Between Citigroup and BLUESCOPE STEEL

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

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

Diversification Opportunities for Citigroup and BLUESCOPE STEEL

0.52

Correlation Coefficient

Citigroup  BLUESCOPE STEEL

Very weak diversification

The 3 months correlation between Citigroup and BLUESCOPE is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BLUESCOPE STEEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLUESCOPE STEEL 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 BLUESCOPE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLUESCOPE STEEL has no effect on the direction of Citigroup i.e., Citigroup and BLUESCOPE STEEL go up and down completely randomly.

Pair Corralation between Citigroup and BLUESCOPE STEEL

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.01 times less return on investment than BLUESCOPE STEEL. But when comparing it to its historical volatility, Citigroup is 1.44 times less risky than BLUESCOPE STEEL. It trades about 0.26 of its potential returns per unit of risk. BLUESCOPE STEEL is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,210  in BLUESCOPE STEEL on September 1, 2024 and sell it today you would earn a total of  140.00  from holding BLUESCOPE STEEL or generate 11.57% return on investment over 90 days.

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

Citigroup  vs.  BLUESCOPE STEEL

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

BLUESCOPE STEEL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BLUESCOPE STEEL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, BLUESCOPE STEEL may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Citigroup and BLUESCOPE STEEL

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

The idea behind Citigroup and BLUESCOPE STEEL 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 CEOs Directory module to screen CEOs from public companies around the world.