Correlation Between Citigroup and Luz Del

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

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

Diversification Opportunities for Citigroup and Luz Del

-0.65

Correlation Coefficient

Citigroup  Luz Del

Excellent diversification

The 3 months correlation between Citigroup and Luz is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Luz del Sur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luz del Sur 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 Luz Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luz del Sur has no effect on the direction of Citigroup i.e., Citigroup and Luz Del go up and down completely randomly.

Pair Corralation between Citigroup and Luz Del

Assuming the 90 days horizon Citigroup is expected to generate 2.25 times more return on investment than Luz Del. However, Citigroup is 2.25 times more volatile than Luz del Sur. It trades about 0.52 of its potential returns per unit of risk. Luz del Sur is currently generating about -0.07 per unit of risk. If you would invest  6,928  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,277  from holding Citigroup or generate 18.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	51.43%
Values	Daily Returns

Citigroup  vs.  Luz del Sur

Citigroup

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Citigroup displayed solid returns over the last few months and may actually be approaching a breakup point.

Luz del Sur

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luz del Sur has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Luz Del is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Luz Del

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

The idea behind Citigroup and Luz del Sur 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.