Correlation Between Citigroup and Southern Copper

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

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

Diversification Opportunities for Citigroup and Southern Copper

-0.19

Correlation Coefficient

Citigroup  Southern Copper

Good diversification

The 3 months correlation between Citigroup and Southern is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Citigroup i.e., Citigroup and Southern Copper go up and down completely randomly.

Pair Corralation between Citigroup and Southern Copper

Given the investment horizon of 90 days Citigroup is expected to generate 1.19 times more return on investment than Southern Copper. However, Citigroup is 1.19 times more volatile than Southern Copper. It trades about -0.13 of its potential returns per unit of risk. Southern Copper is currently generating about -0.27 per unit of risk. If you would invest  161,901  in Citigroup on December 5, 2024 and sell it today you would lose (10,001) from holding Citigroup or give up 6.18% of portfolio value over 90 days.

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

Citigroup  vs.  Southern Copper

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, Citigroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Southern Copper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and Southern Copper

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

The idea behind Citigroup and Southern Copper 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.