Correlation Between Citigroup and INNOX Advanced

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

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

Diversification Opportunities for Citigroup and INNOX Advanced

-0.86

Correlation Coefficient

Citigroup  INNOX Advanced

Pay attention - limited upside

The 3 months correlation between Citigroup and INNOX is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and INNOX Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOX Advanced Materials 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 INNOX Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOX Advanced Materials has no effect on the direction of Citigroup i.e., Citigroup and INNOX Advanced go up and down completely randomly.

Pair Corralation between Citigroup and INNOX Advanced

Taking into account the 90-day investment horizon Citigroup is expected to generate 14.27 times less return on investment than INNOX Advanced. But when comparing it to its historical volatility, Citigroup is 1.76 times less risky than INNOX Advanced. It trades about 0.05 of its potential returns per unit of risk. INNOX Advanced Materials is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  1,793,234  in INNOX Advanced Materials on October 9, 2024 and sell it today you would earn a total of  381,766  from holding INNOX Advanced Materials or generate 21.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  INNOX Advanced Materials

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

INNOX Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INNOX Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and INNOX Advanced

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

The idea behind Citigroup and INNOX Advanced Materials 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.