Correlation Between Citigroup and LVMH Mot

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

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

Diversification Opportunities for Citigroup and LVMH Mot

-0.41

Correlation Coefficient

Citigroup  LVMH Mot

Very good diversification

The 3 months correlation between Citigroup and LVMH is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Mot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Citigroup i.e., Citigroup and LVMH Mot go up and down completely randomly.

Pair Corralation between Citigroup and LVMH Mot

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the LVMH Mot. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.28 times less risky than LVMH Mot. The stock trades about -0.03 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  58,080  in LVMH Mot Hennessy on September 23, 2024 and sell it today you would earn a total of  4,860  from holding LVMH Mot Hennessy or generate 8.37% return on investment over 90 days.

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

Citigroup  vs.  LVMH Mot Hennessy

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 unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LVMH Mot Hennessy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LVMH Mot Hennessy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, LVMH Mot may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and LVMH Mot

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

The idea behind Citigroup and LVMH Mot Hennessy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .