Correlation Between Citigroup and SpareBank

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

By analyzing existing cross correlation between Citigroup and SpareBank 1 Sr Norge, you can compare the effects of market volatilities on Citigroup and SpareBank 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 SpareBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and SpareBank.

Diversification Opportunities for Citigroup and SpareBank

0.63

Correlation Coefficient

Citigroup  SpareBank

Poor diversification

The 3 months correlation between Citigroup and SpareBank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SpareBank 1 Sr Norge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpareBank 1 Sr 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 SpareBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpareBank 1 Sr has no effect on the direction of Citigroup i.e., Citigroup and SpareBank go up and down completely randomly.

Pair Corralation between Citigroup and SpareBank

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.63 times more return on investment than SpareBank. However, Citigroup is 1.63 times more volatile than SpareBank 1 Sr Norge. It trades about 0.14 of its potential returns per unit of risk. SpareBank 1 Sr Norge 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  967.00  from holding Citigroup or generate 15.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  SpareBank 1 Sr Norge

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.

SpareBank 1 Sr

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SpareBank 1 Sr Norge are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, SpareBank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and SpareBank

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

The idea behind Citigroup and SpareBank 1 Sr Norge 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.