Correlation Between Compania and Citigroup

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

By analyzing existing cross correlation between Compania de Minas and Citigroup, you can compare the effects of market volatilities on Compania and Citigroup 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 Compania with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Citigroup.

Diversification Opportunities for Compania and Citigroup

-0.36

Correlation Coefficient

Compania  Citigroup

Very good diversification

The 3 months correlation between Compania and Citigroup is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Compania 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 Compania de Minas are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Compania i.e., Compania and Citigroup go up and down completely randomly.

Pair Corralation between Compania and Citigroup

Assuming the 90 days trading horizon Compania de Minas is expected to under-perform the Citigroup. In addition to that, Compania is 1.18 times more volatile than Citigroup. It trades about -0.11 of its total potential returns per unit of risk. Citigroup is currently generating about 0.15 per unit of volatility. If you would invest  6,600  in Citigroup on October 11, 2024 and sell it today you would earn a total of  665.00  from holding Citigroup or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.33%
Values	Daily Returns

Compania de Minas  vs.  Citigroup

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Citigroup

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very inconsistent forward indicators, Citigroup displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania and Citigroup

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

The idea behind Compania de Minas and Citigroup 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.