Correlation Between Citigroup and Ecolab

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

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

Diversification Opportunities for Citigroup and Ecolab

0.3

Correlation Coefficient

Citigroup  Ecolab

Weak diversification

The 3 months correlation between Citigroup and Ecolab is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of Citigroup i.e., Citigroup and Ecolab go up and down completely randomly.

Pair Corralation between Citigroup and Ecolab

Taking into account the 90-day investment horizon Citigroup is expected to generate 20.24 times more return on investment than Ecolab. However, Citigroup is 20.24 times more volatile than Ecolab Inc. It trades about 0.09 of its potential returns per unit of risk. Ecolab Inc is currently generating about 0.22 per unit of risk. If you would invest  6,975  in Citigroup on September 27, 2024 and sell it today you would earn a total of  160.00  from holding Citigroup or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Ecolab Inc

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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

Ecolab Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Ecolab is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Ecolab

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

The idea behind Citigroup and Ecolab Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.