Correlation Between Citigroup and Swiss Re

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

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

Diversification Opportunities for Citigroup and Swiss Re

0.72

Correlation Coefficient

Citigroup  Swiss Re

Poor diversification

The 3 months correlation between Citigroup and Swiss is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Swiss Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re 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 Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re has no effect on the direction of Citigroup i.e., Citigroup and Swiss Re go up and down completely randomly.

Pair Corralation between Citigroup and Swiss Re

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.1 times less return on investment than Swiss Re. In addition to that, Citigroup is 1.2 times more volatile than Swiss Re. It trades about 0.07 of its total potential returns per unit of risk. Swiss Re is currently generating about 0.09 per unit of volatility. If you would invest  2,069  in Swiss Re on September 20, 2024 and sell it today you would earn a total of  1,627  from holding Swiss Re or generate 78.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  Swiss Re

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

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.

Swiss Re

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Re are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Swiss Re may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Swiss Re

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

The idea behind Citigroup and Swiss Re 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.