Correlation Between Citigroup and BUNZL PLC

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

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

Diversification Opportunities for Citigroup and BUNZL PLC

0.25

Correlation Coefficient

Citigroup  BUNZL PLC

Modest diversification

The 3 months correlation between Citigroup and BUNZL is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BUNZL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BUNZL PLC ADR 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 BUNZL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BUNZL PLC ADR has no effect on the direction of Citigroup i.e., Citigroup and BUNZL PLC go up and down completely randomly.

Pair Corralation between Citigroup and BUNZL PLC

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.76 times more return on investment than BUNZL PLC. However, Citigroup is 1.31 times less risky than BUNZL PLC. It trades about 0.01 of its potential returns per unit of risk. BUNZL PLC ADR is currently generating about -0.06 per unit of risk. If you would invest  6,828  in Citigroup on September 21, 2024 and sell it today you would earn a total of  14.00  from holding Citigroup or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  BUNZL PLC ADR

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BUNZL PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and BUNZL PLC

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

The idea behind Citigroup and BUNZL PLC ADR 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.