Correlation Between Citigroup and Monteiro Aranha

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

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

Diversification Opportunities for Citigroup and Monteiro Aranha

0.26

Correlation Coefficient

Citigroup  Monteiro Aranha

Modest diversification

The 3 months correlation between Citigroup and Monteiro is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Monteiro Aranha SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monteiro Aranha 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 Monteiro Aranha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monteiro Aranha SA has no effect on the direction of Citigroup i.e., Citigroup and Monteiro Aranha go up and down completely randomly.

Pair Corralation between Citigroup and Monteiro Aranha

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.25 times more return on investment than Monteiro Aranha. However, Citigroup is 2.25 times more volatile than Monteiro Aranha SA. It trades about 0.19 of its potential returns per unit of risk. Monteiro Aranha SA is currently generating about 0.07 per unit of risk. If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,408  from holding Citigroup or generate 24.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Monteiro Aranha SA

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Monteiro Aranha SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monteiro Aranha SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monteiro Aranha is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Monteiro Aranha

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

The idea behind Citigroup and Monteiro Aranha 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.