Correlation Between Citigroup and Boa Concept

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

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

Diversification Opportunities for Citigroup and Boa Concept

0.38

Correlation Coefficient

Citigroup  Boa Concept

Weak diversification

The 3 months correlation between Citigroup and Boa is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Boa Concept SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boa Concept SA 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 Boa Concept. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boa Concept SA has no effect on the direction of Citigroup i.e., Citigroup and Boa Concept go up and down completely randomly.

Pair Corralation between Citigroup and Boa Concept

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.19 times less return on investment than Boa Concept. But when comparing it to its historical volatility, Citigroup is 1.8 times less risky than Boa Concept. It trades about 0.03 of its potential returns per unit of risk. Boa Concept SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,725  in Boa Concept SA on December 28, 2024 and sell it today you would earn a total of  415.00  from holding Boa Concept SA or generate 24.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Boa Concept SA

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Boa Concept SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boa Concept SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Boa Concept reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Boa Concept

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

The idea behind Citigroup and Boa Concept SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.