Correlation Between Citigroup and Eaton PLC
Can any of the company-specific risk be diversified away by investing in both Citigroup and Eaton PLC 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 Eaton PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Eaton PLC, you can compare the effects of market volatilities on Citigroup and Eaton PLC 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 Eaton PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Eaton PLC.
Diversification Opportunities for Citigroup and Eaton PLC
Almost no diversification
The 3 months correlation between Citigroup and Eaton is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Eaton PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton PLC 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 Eaton PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton PLC has no effect on the direction of Citigroup i.e., Citigroup and Eaton PLC go up and down completely randomly.
Pair Corralation between Citigroup and Eaton PLC
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.3 times less return on investment than Eaton PLC. But when comparing it to its historical volatility, Citigroup is 1.0 times less risky than Eaton PLC. It trades about 0.2 of its potential returns per unit of risk. Eaton PLC is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 25,970 in Eaton PLC on September 10, 2024 and sell it today you would earn a total of 9,235 from holding Eaton PLC or generate 35.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.46% |
Values | Daily Returns |
Citigroup vs. Eaton PLC
Performance |
Timeline |
Citigroup |
Eaton PLC |
Citigroup and Eaton PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and Eaton PLC
The main advantage of trading using opposite Citigroup and Eaton PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Eaton PLC 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 Eaton PLC will offset losses from the drop in Eaton PLC's long position.Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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