Correlation Between Citigroup and UniCredit SpA

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

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

Diversification Opportunities for Citigroup and UniCredit SpA

-0.16

Correlation Coefficient

Citigroup  UniCredit SpA

Good diversification

The 3 months correlation between Citigroup and UniCredit is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and UniCredit SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UniCredit SpA 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 UniCredit SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UniCredit SpA has no effect on the direction of Citigroup i.e., Citigroup and UniCredit SpA go up and down completely randomly.

Pair Corralation between Citigroup and UniCredit SpA

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the UniCredit SpA. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.66 times less risky than UniCredit SpA. The stock trades about -0.03 of its potential returns per unit of risk. The UniCredit SpA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,803  in UniCredit SpA on September 23, 2024 and sell it today you would lose (28.00) from holding UniCredit SpA or give up 0.74% of portfolio value over 90 days.

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

Citigroup  vs.  UniCredit SpA

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 unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UniCredit SpA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UniCredit SpA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, UniCredit SpA 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 UniCredit SpA

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

The idea behind Citigroup and UniCredit SpA 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 Stocks Directory module to find actively traded stocks across global markets.