Correlation Between Citigroup and Akzo Nobel

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

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

Diversification Opportunities for Citigroup and Akzo Nobel

0.3

Correlation Coefficient

Citigroup  Akzo Nobel

Weak diversification

The 3 months correlation between Citigroup and Akzo is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Akzo Nobel NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akzo Nobel NV 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 Akzo Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akzo Nobel NV has no effect on the direction of Citigroup i.e., Citigroup and Akzo Nobel go up and down completely randomly.

Pair Corralation between Citigroup and Akzo Nobel

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.17 times more return on investment than Akzo Nobel. However, Citigroup is 1.17 times more volatile than Akzo Nobel NV. It trades about 0.13 of its potential returns per unit of risk. Akzo Nobel NV is currently generating about 0.0 per unit of risk. If you would invest  4,025  in Citigroup on November 28, 2024 and sell it today you would earn a total of  3,789  from holding Citigroup or generate 94.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.9%
Values	Daily Returns

Citigroup  vs.  Akzo Nobel NV

Citigroup

Risk-Adjusted Performance

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 unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Akzo Nobel NV

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Akzo Nobel NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Akzo Nobel may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Citigroup and Akzo Nobel

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

The idea behind Citigroup and Akzo Nobel NV 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.