Correlation Between Citigroup and Catella AB

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

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

Diversification Opportunities for Citigroup and Catella AB

-0.34

Correlation Coefficient

Citigroup  Catella AB

Very good diversification

The 3 months correlation between Citigroup and Catella is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Catella AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catella AB 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 Catella AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catella AB has no effect on the direction of Citigroup i.e., Citigroup and Catella AB go up and down completely randomly.

Pair Corralation between Citigroup and Catella AB

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.11 times less return on investment than Catella AB. In addition to that, Citigroup is 1.04 times more volatile than Catella AB. It trades about 0.01 of its total potential returns per unit of risk. Catella AB is currently generating about 0.12 per unit of volatility. If you would invest  2,785  in Catella AB on December 30, 2024 and sell it today you would earn a total of  415.00  from holding Catella AB or generate 14.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Catella AB

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Catella AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catella AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Catella AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Catella AB

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

The idea behind Citigroup and Catella AB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.