Correlation Between Citigroup and Airbus SE

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

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

Diversification Opportunities for Citigroup and Airbus SE

0.27

Correlation Coefficient

Citigroup  Airbus SE

Modest diversification

The 3 months correlation between Citigroup and Airbus is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Airbus SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus SE 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 Airbus SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus SE has no effect on the direction of Citigroup i.e., Citigroup and Airbus SE go up and down completely randomly.

Pair Corralation between Citigroup and Airbus SE

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.99 times more return on investment than Airbus SE. However, Citigroup is 1.01 times less risky than Airbus SE. It trades about 0.25 of its potential returns per unit of risk. Airbus SE is currently generating about 0.16 per unit of risk. If you would invest  6,360  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,809  from holding Citigroup or generate 28.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Airbus SE

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Airbus SE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Airbus SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Airbus SE

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

The idea behind Citigroup and Airbus SE 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.