Correlation Between Citigroup and Arion Banki

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

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

Diversification Opportunities for Citigroup and Arion Banki

0.6

Correlation Coefficient

Citigroup  Arion Banki

Poor diversification

The 3 months correlation between Citigroup and Arion is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf 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 Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Citigroup i.e., Citigroup and Arion Banki go up and down completely randomly.

Pair Corralation between Citigroup and Arion Banki

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.1 times more return on investment than Arion Banki. However, Citigroup is 1.1 times more volatile than Arion banki hf. It trades about 0.13 of its potential returns per unit of risk. Arion banki hf is currently generating about 0.04 per unit of risk. If you would invest  7,090  in Citigroup on December 1, 2024 and sell it today you would earn a total of  905.00  from holding Citigroup or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  Arion banki hf

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Arion banki hf

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arion Banki is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Arion Banki

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

The idea behind Citigroup and Arion banki hf 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.