Correlation Between Citigroup and APS Energia

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

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

Diversification Opportunities for Citigroup and APS Energia

0.26

Correlation Coefficient

Citigroup  APS Energia

Modest diversification

The 3 months correlation between Citigroup and APS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and APS Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APS Energia 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 APS Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APS Energia SA has no effect on the direction of Citigroup i.e., Citigroup and APS Energia go up and down completely randomly.

Pair Corralation between Citigroup and APS Energia

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.74 times less return on investment than APS Energia. But when comparing it to its historical volatility, Citigroup is 1.88 times less risky than APS Energia. It trades about 0.03 of its potential returns per unit of risk. APS Energia SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  257.00  in APS Energia SA on December 29, 2024 and sell it today you would earn a total of  53.00  from holding APS Energia SA or generate 20.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  APS Energia 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.

APS Energia SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in APS Energia SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, APS Energia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and APS Energia

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

The idea behind Citigroup and APS Energia 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.