Correlation Between Citigroup and Coca-Cola Bottlers

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

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

Diversification Opportunities for Citigroup and Coca-Cola Bottlers

0.86

Correlation Coefficient

Citigroup  Coca-Cola Bottlers

Very poor diversification

The 3 months correlation between Citigroup and Coca-Cola is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Coca Cola Bottlers Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Bottlers 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 Coca-Cola Bottlers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Bottlers has no effect on the direction of Citigroup i.e., Citigroup and Coca-Cola Bottlers go up and down completely randomly.

Pair Corralation between Citigroup and Coca-Cola Bottlers

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.13 times less return on investment than Coca-Cola Bottlers. But when comparing it to its historical volatility, Citigroup is 2.5 times less risky than Coca-Cola Bottlers. It trades about 0.14 of its potential returns per unit of risk. Coca Cola Bottlers Japan is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  701.00  in Coca Cola Bottlers Japan on October 1, 2024 and sell it today you would earn a total of  85.00  from holding Coca Cola Bottlers Japan or generate 12.13% return on investment over 90 days.

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

Citigroup  vs.  Coca Cola Bottlers Japan

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

Coca Cola Bottlers

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Bottlers Japan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Coca-Cola Bottlers showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Coca-Cola Bottlers

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

The idea behind Citigroup and Coca Cola Bottlers Japan 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 Stocks Directory module to find actively traded stocks across global markets.