Correlation Between Citigroup and Graphic Packaging

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

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

Diversification Opportunities for Citigroup and Graphic Packaging

0.05

Correlation Coefficient

Citigroup  Graphic Packaging

Significant diversification

The 3 months correlation between Citigroup and Graphic is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Graphic Packaging Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphic Packaging Holding 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 Graphic Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphic Packaging Holding has no effect on the direction of Citigroup i.e., Citigroup and Graphic Packaging go up and down completely randomly.

Pair Corralation between Citigroup and Graphic Packaging

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.08 times more return on investment than Graphic Packaging. However, Citigroup is 1.08 times more volatile than Graphic Packaging Holding. It trades about 0.23 of its potential returns per unit of risk. Graphic Packaging Holding is currently generating about -0.03 per unit of risk. If you would invest  6,255  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,744  from holding Citigroup or generate 27.88% return on investment over 90 days.

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

Citigroup  vs.  Graphic Packaging Holding

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Graphic Packaging Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphic Packaging Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Graphic Packaging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Graphic Packaging

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

The idea behind Citigroup and Graphic Packaging Holding 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.