Correlation Between Citigroup and Dycasa SA

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

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

Diversification Opportunities for Citigroup and Dycasa SA

0.92

Correlation Coefficient

Citigroup  Dycasa SA

Almost no diversification

The 3 months correlation between Citigroup and Dycasa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dycasa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycasa SA 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 Dycasa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycasa SA has no effect on the direction of Citigroup i.e., Citigroup and Dycasa SA go up and down completely randomly.

Pair Corralation between Citigroup and Dycasa SA

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.62 times less return on investment than Dycasa SA. But when comparing it to its historical volatility, Citigroup is 3.42 times less risky than Dycasa SA. It trades about 0.18 of its potential returns per unit of risk. Dycasa SA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  55,100  in Dycasa SA on September 16, 2024 and sell it today you would earn a total of  49,900  from holding Dycasa SA or generate 90.56% return on investment over 90 days.

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

Citigroup  vs.  Dycasa SA

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.

Dycasa SA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dycasa SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dycasa SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Dycasa SA

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

The idea behind Citigroup and Dycasa SA 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.