Correlation Between Citigroup and Renaissance Europe

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

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

Diversification Opportunities for Citigroup and Renaissance Europe

0.63

Correlation Coefficient

Citigroup  Renaissance Europe

Poor diversification

The 3 months correlation between Citigroup and Renaissance is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Renaissance Europe Z in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renaissance Europe 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 Renaissance Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renaissance Europe has no effect on the direction of Citigroup i.e., Citigroup and Renaissance Europe go up and down completely randomly.

Pair Corralation between Citigroup and Renaissance Europe

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.32 times more return on investment than Renaissance Europe. However, Citigroup is 2.32 times more volatile than Renaissance Europe Z. It trades about 0.05 of its potential returns per unit of risk. Renaissance Europe Z is currently generating about 0.03 per unit of risk. If you would invest  7,086  in Citigroup on December 26, 2024 and sell it today you would earn a total of  361.00  from holding Citigroup or generate 5.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  Renaissance Europe Z

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Renaissance Europe

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Renaissance Europe Z are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Renaissance Europe is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Renaissance Europe

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

The idea behind Citigroup and Renaissance Europe Z 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 Transaction History module to view history of all your transactions and understand their impact on performance.