Correlation Between Citigroup and Euronext

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

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

Diversification Opportunities for Citigroup and Euronext

0.72

Correlation Coefficient

Citigroup  Euronext

Poor diversification

The 3 months correlation between Citigroup and Euronext is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Euronext NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euronext NV 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 Euronext. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euronext NV has no effect on the direction of Citigroup i.e., Citigroup and Euronext go up and down completely randomly.

Pair Corralation between Citigroup and Euronext

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.42 times more return on investment than Euronext. However, Citigroup is 1.42 times more volatile than Euronext NV. It trades about 0.14 of its potential returns per unit of risk. Euronext NV is currently generating about 0.09 per unit of risk. If you would invest  6,133  in Citigroup on September 27, 2024 and sell it today you would earn a total of  1,002  from holding Citigroup or generate 16.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Euronext NV

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.

Euronext NV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Euronext NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Euronext may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Euronext

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

The idea behind Citigroup and Euronext NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.