Correlation Between Citigroup and Arcadis NV

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

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

Diversification Opportunities for Citigroup and Arcadis NV

-0.22

Correlation Coefficient

Citigroup  Arcadis NV

Very good diversification

The 3 months correlation between Citigroup and Arcadis is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis 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 Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of Citigroup i.e., Citigroup and Arcadis NV go up and down completely randomly.

Pair Corralation between Citigroup and Arcadis NV

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.94 times more return on investment than Arcadis NV. However, Citigroup is 1.07 times less risky than Arcadis NV. It trades about 0.03 of its potential returns per unit of risk. Arcadis NV is currently generating about -0.08 per unit of risk. If you would invest  6,991  in Citigroup on December 29, 2024 and sell it today you would earn a total of  194.00  from holding Citigroup or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Citigroup  vs.  Arcadis NV

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.

Arcadis NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcadis NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic 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 Arcadis NV

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

The idea behind Citigroup and Arcadis 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 Global Correlations module to find global opportunities by holding instruments from different markets.