Correlation Between Citigroup and Barings Emerging

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

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

Diversification Opportunities for Citigroup and Barings Emerging

0.02

Correlation Coefficient

Citigroup  Barings Emerging

Significant diversification

The 3 months correlation between Citigroup and Barings is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Barings Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Emerging Markets 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 Barings Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Emerging Markets has no effect on the direction of Citigroup i.e., Citigroup and Barings Emerging go up and down completely randomly.

Pair Corralation between Citigroup and Barings Emerging

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.1 times less return on investment than Barings Emerging. In addition to that, Citigroup is 8.3 times more volatile than Barings Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Barings Emerging Markets is currently generating about 0.3 per unit of volatility. If you would invest  728.00  in Barings Emerging Markets on December 28, 2024 and sell it today you would earn a total of  32.00  from holding Barings Emerging Markets or generate 4.4% return on investment over 90 days.

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

Citigroup  vs.  Barings Emerging Markets

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Barings Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Emerging Markets are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Barings Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Barings Emerging

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

The idea behind Citigroup and Barings Emerging Markets 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.