Correlation Between Citigroup and DO AG

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

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

Diversification Opportunities for Citigroup and DO AG

0.73

Correlation Coefficient

Citigroup  DO AG

Poor diversification

The 3 months correlation between Citigroup and DOCO is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DO AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO AG 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 DO AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO AG has no effect on the direction of Citigroup i.e., Citigroup and DO AG go up and down completely randomly.

Pair Corralation between Citigroup and DO AG

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.66 times less return on investment than DO AG. But when comparing it to its historical volatility, Citigroup is 1.3 times less risky than DO AG. It trades about 0.1 of its potential returns per unit of risk. DO AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  533,500  in DO AG on September 22, 2024 and sell it today you would earn a total of  107,750  from holding DO AG or generate 20.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  DO AG

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

DO AG

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Citigroup and DO AG

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

The idea behind Citigroup and DO AG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.