Correlation Between Citigroup and LG Battery

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

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

Diversification Opportunities for Citigroup and LG Battery

0.68

Correlation Coefficient

Citigroup  LG Battery

Poor diversification

The 3 months correlation between Citigroup and BATE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LG Battery Value Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Battery Value 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 LG Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Battery Value has no effect on the direction of Citigroup i.e., Citigroup and LG Battery go up and down completely randomly.

Pair Corralation between Citigroup and LG Battery

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.22 times more return on investment than LG Battery. However, Citigroup is 1.22 times more volatile than LG Battery Value Chain. It trades about 0.05 of its potential returns per unit of risk. LG Battery Value Chain is currently generating about 0.01 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  311.00  from holding Citigroup or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  LG Battery Value Chain

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

LG Battery Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days LG Battery Value Chain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LG Battery is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and LG Battery

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

The idea behind Citigroup and LG Battery Value Chain 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.