Correlation Between Citigroup and Elbit Imaging

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

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

Diversification Opportunities for Citigroup and Elbit Imaging

0.77

Correlation Coefficient

Citigroup  Elbit Imaging

Poor diversification

The 3 months correlation between Citigroup and Elbit is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Elbit Imaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elbit Imaging 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 Elbit Imaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elbit Imaging has no effect on the direction of Citigroup i.e., Citigroup and Elbit Imaging go up and down completely randomly.

Pair Corralation between Citigroup and Elbit Imaging

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.49 times less return on investment than Elbit Imaging. But when comparing it to its historical volatility, Citigroup is 1.54 times less risky than Elbit Imaging. It trades about 0.13 of its potential returns per unit of risk. Elbit Imaging is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  46,690  in Elbit Imaging on September 29, 2024 and sell it today you would earn a total of  13,310  from holding Elbit Imaging or generate 28.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	74.6%
Values	Daily Returns

Citigroup  vs.  Elbit Imaging

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Elbit Imaging

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elbit Imaging are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Elbit Imaging unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Elbit Imaging

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

The idea behind Citigroup and Elbit Imaging 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.