Correlation Between Citigroup and VIDRALA

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

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

Diversification Opportunities for Citigroup and VIDRALA

0.1

Correlation Coefficient

Citigroup  VIDRALA

Average diversification

The 3 months correlation between Citigroup and VIDRALA is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VIDRALA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIDRALA 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 VIDRALA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIDRALA has no effect on the direction of Citigroup i.e., Citigroup and VIDRALA go up and down completely randomly.

Pair Corralation between Citigroup and VIDRALA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times more return on investment than VIDRALA. However, Citigroup is 1.16 times more volatile than VIDRALA. It trades about 0.19 of its potential returns per unit of risk. VIDRALA is currently generating about -0.16 per unit of risk. If you would invest  6,900  in Citigroup on September 18, 2024 and sell it today you would earn a total of  212.00  from holding Citigroup or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  VIDRALA

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

VIDRALA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIDRALA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, VIDRALA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and VIDRALA

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

The idea behind Citigroup and VIDRALA 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.