Correlation Between Citigroup and Sociedad Qumica

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

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

Diversification Opportunities for Citigroup and Sociedad Qumica

0.37

Correlation Coefficient

Citigroup  Sociedad Qumica

Weak diversification

The 3 months correlation between Citigroup and Sociedad is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sociedad Qumica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Qumica y 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 Sociedad Qumica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Qumica y has no effect on the direction of Citigroup i.e., Citigroup and Sociedad Qumica go up and down completely randomly.

Pair Corralation between Citigroup and Sociedad Qumica

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.73 times more return on investment than Sociedad Qumica. However, Citigroup is 1.36 times less risky than Sociedad Qumica. It trades about 0.07 of its potential returns per unit of risk. Sociedad Qumica y is currently generating about -0.05 per unit of risk. If you would invest  4,293  in Citigroup on September 3, 2024 and sell it today you would earn a total of  2,794  from holding Citigroup or generate 65.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.79%
Values	Daily Returns

Citigroup  vs.  Sociedad Qumica y

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sociedad Qumica y

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Qumica y are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Sociedad Qumica may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Sociedad Qumica

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

The idea behind Citigroup and Sociedad Qumica y 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.