Correlation Between Citigroup and Pexip Holding

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

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

Diversification Opportunities for Citigroup and Pexip Holding

0.86

Correlation Coefficient

Citigroup  Pexip Holding

Very poor diversification

The 3 months correlation between Citigroup and Pexip is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pexip Holding ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pexip Holding ASA 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 Pexip Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pexip Holding ASA has no effect on the direction of Citigroup i.e., Citigroup and Pexip Holding go up and down completely randomly.

Pair Corralation between Citigroup and Pexip Holding

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times less return on investment than Pexip Holding. In addition to that, Citigroup is 1.11 times more volatile than Pexip Holding ASA. It trades about 0.17 of its total potential returns per unit of risk. Pexip Holding ASA is currently generating about 0.21 per unit of volatility. If you would invest  3,670  in Pexip Holding ASA on September 17, 2024 and sell it today you would earn a total of  930.00  from holding Pexip Holding ASA or generate 25.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  Pexip Holding ASA

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pexip Holding ASA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pexip Holding ASA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pexip Holding displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Pexip Holding

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

The idea behind Citigroup and Pexip Holding ASA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.