Correlation Between Citigroup and Elma Electronic

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

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

Diversification Opportunities for Citigroup and Elma Electronic

0.71

Correlation Coefficient

Citigroup  Elma Electronic

Poor diversification

The 3 months correlation between Citigroup and Elma is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Elma Electronic AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elma Electronic 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 Elma Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elma Electronic AG has no effect on the direction of Citigroup i.e., Citigroup and Elma Electronic go up and down completely randomly.

Pair Corralation between Citigroup and Elma Electronic

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.39 times more return on investment than Elma Electronic. However, Citigroup is 2.39 times more volatile than Elma Electronic AG. It trades about 0.1 of its potential returns per unit of risk. Elma Electronic AG is currently generating about 0.22 per unit of risk. If you would invest  6,203  in Citigroup on September 22, 2024 and sell it today you would earn a total of  716.00  from holding Citigroup or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	26.56%
Values	Daily Returns

Citigroup  vs.  Elma Electronic 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.

Elma Electronic AG

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Elma Electronic AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Elma Electronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Elma Electronic

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

The idea behind Citigroup and Elma Electronic 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.