Correlation Between Citigroup and Booking Holdings

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

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

Diversification Opportunities for Citigroup and Booking Holdings

0.94

Correlation Coefficient

Citigroup  Booking Holdings

Almost no diversification

The 3 months correlation between Citigroup and Booking is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Citigroup i.e., Citigroup and Booking Holdings go up and down completely randomly.

Pair Corralation between Citigroup and Booking Holdings

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.05 times less return on investment than Booking Holdings. But when comparing it to its historical volatility, Citigroup is 1.18 times less risky than Booking Holdings. It trades about 0.14 of its potential returns per unit of risk. Booking Holdings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  13,945  in Booking Holdings on September 23, 2024 and sell it today you would earn a total of  3,184  from holding Booking Holdings or generate 22.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.67%
Values	Daily Returns

Citigroup  vs.  Booking Holdings

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Booking Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Booking Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Booking Holdings

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

The idea behind Citigroup and Booking Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.