Correlation Between Citigroup and AIB Group

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

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

Diversification Opportunities for Citigroup and AIB Group

0.08

Correlation Coefficient

Citigroup  AIB Group

Significant diversification

The 3 months correlation between Citigroup and AIB is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and AIB Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIB Group 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 AIB Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIB Group plc has no effect on the direction of Citigroup i.e., Citigroup and AIB Group go up and down completely randomly.

Pair Corralation between Citigroup and AIB Group

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.33 times less return on investment than AIB Group. But when comparing it to its historical volatility, Citigroup is 1.85 times less risky than AIB Group. It trades about 0.07 of its potential returns per unit of risk. AIB Group plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  745.00  in AIB Group plc on September 30, 2024 and sell it today you would earn a total of  362.00  from holding AIB Group plc or generate 48.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.87%
Values	Daily Returns

Citigroup  vs.  AIB Group plc

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

AIB Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIB Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and AIB Group

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

The idea behind Citigroup and AIB Group plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.