Correlation Between Citigroup and BRNPB

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

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

Diversification Opportunities for Citigroup and BRNPB

-0.37

Correlation Coefficient

Citigroup  BRNPB

Very good diversification

The 3 months correlation between Citigroup and BRNPB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BRNPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRNPB 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 BRNPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRNPB has no effect on the direction of Citigroup i.e., Citigroup and BRNPB go up and down completely randomly.

Pair Corralation between Citigroup and BRNPB

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.25 times more return on investment than BRNPB. However, Citigroup is 3.93 times less risky than BRNPB. It trades about 0.04 of its potential returns per unit of risk. BRNPB is currently generating about 0.01 per unit of risk. If you would invest  6,929  in Citigroup on December 22, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	21.31%
Values	Daily Returns

Citigroup  vs.  BRNPB

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.

BRNPB

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRNPB has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, BRNPB is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and BRNPB

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

The idea behind Citigroup and BRNPB 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.