Correlation Between Citigroup and CPL Group

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

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

Diversification Opportunities for Citigroup and CPL Group

-0.89

Correlation Coefficient

Citigroup  CPL Group

Pay attention - limited upside

The 3 months correlation between Citigroup and CPL is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CPL Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPL Group Public 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 CPL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPL Group Public has no effect on the direction of Citigroup i.e., Citigroup and CPL Group go up and down completely randomly.

Pair Corralation between Citigroup and CPL Group

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.8 times more return on investment than CPL Group. However, Citigroup is 1.25 times less risky than CPL Group. It trades about 0.18 of its potential returns per unit of risk. CPL Group Public is currently generating about -0.19 per unit of risk. If you would invest  5,788  in Citigroup on September 16, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Citigroup  vs.  CPL Group Public

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

CPL Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPL Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Citigroup and CPL Group

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

The idea behind Citigroup and CPL Group Public 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.