Correlation Between Citigroup and Lotes

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

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

Diversification Opportunities for Citigroup and Lotes

0.84

Correlation Coefficient

Citigroup  Lotes

Very poor diversification

The 3 months correlation between Citigroup and Lotes is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lotes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotes 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 Lotes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotes has no effect on the direction of Citigroup i.e., Citigroup and Lotes go up and down completely randomly.

Pair Corralation between Citigroup and Lotes

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.78 times less return on investment than Lotes. But when comparing it to its historical volatility, Citigroup is 1.63 times less risky than Lotes. It trades about 0.18 of its potential returns per unit of risk. Lotes Co is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  135,500  in Lotes Co on September 14, 2024 and sell it today you would earn a total of  55,500  from holding Lotes Co or generate 40.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

Citigroup  vs.  Lotes Co

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Lotes

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lotes Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lotes showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Lotes

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

The idea behind Citigroup and Lotes Co 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.