Correlation Between Citigroup and Balfour Beatty

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

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

Diversification Opportunities for Citigroup and Balfour Beatty

0.63

Correlation Coefficient

Citigroup  Balfour Beatty

Poor diversification

The 3 months correlation between Citigroup and Balfour is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Balfour Beatty plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty plc 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 Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty plc has no effect on the direction of Citigroup i.e., Citigroup and Balfour Beatty go up and down completely randomly.

Pair Corralation between Citigroup and Balfour Beatty

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.43 times more return on investment than Balfour Beatty. However, Citigroup is 1.43 times more volatile than Balfour Beatty plc. It trades about 0.16 of its potential returns per unit of risk. Balfour Beatty plc is currently generating about 0.06 per unit of risk. If you would invest  6,360  in Citigroup on September 27, 2024 and sell it today you would earn a total of  740.00  from holding Citigroup or generate 11.64% return on investment over 90 days.

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

Citigroup  vs.  Balfour Beatty plc

Citigroup

Risk-Adjusted Performance

10 of 100

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Balfour Beatty plc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Balfour Beatty plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Balfour Beatty is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Balfour Beatty

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

The idea behind Citigroup and Balfour Beatty plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.