Correlation Between Citigroup and Centerra Gold

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

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

Diversification Opportunities for Citigroup and Centerra Gold

0.5

Correlation Coefficient

Citigroup  Centerra Gold

Very weak diversification

The 3 months correlation between Citigroup and Centerra is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Centerra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centerra Gold 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 Centerra Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centerra Gold has no effect on the direction of Citigroup i.e., Citigroup and Centerra Gold go up and down completely randomly.

Pair Corralation between Citigroup and Centerra Gold

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.27 times less return on investment than Centerra Gold. But when comparing it to its historical volatility, Citigroup is 1.14 times less risky than Centerra Gold. It trades about 0.01 of its potential returns per unit of risk. Centerra Gold is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Centerra Gold on December 30, 2024 and sell it today you would earn a total of  118.00  from holding Centerra Gold or generate 14.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Citigroup  vs.  Centerra Gold

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.

Centerra Gold

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centerra Gold are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Centerra Gold displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Centerra Gold

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

The idea behind Citigroup and Centerra Gold 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.