Correlation Between Citigroup and CHAMPION BREWERIES

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

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

Diversification Opportunities for Citigroup and CHAMPION BREWERIES

0.79

Correlation Coefficient

Citigroup  CHAMPION BREWERIES

Poor diversification

The 3 months correlation between Citigroup and CHAMPION is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CHAMPION BREWERIES PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAMPION BREWERIES PLC 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 CHAMPION BREWERIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAMPION BREWERIES PLC has no effect on the direction of Citigroup i.e., Citigroup and CHAMPION BREWERIES go up and down completely randomly.

Pair Corralation between Citigroup and CHAMPION BREWERIES

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.12 times less return on investment than CHAMPION BREWERIES. But when comparing it to its historical volatility, Citigroup is 3.39 times less risky than CHAMPION BREWERIES. It trades about 0.2 of its potential returns per unit of risk. CHAMPION BREWERIES PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  378.00  in CHAMPION BREWERIES PLC on September 16, 2024 and sell it today you would earn a total of  12.00  from holding CHAMPION BREWERIES PLC or generate 3.17% return on investment over 90 days.

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

Citigroup  vs.  CHAMPION BREWERIES PLC

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

CHAMPION BREWERIES PLC

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Citigroup and CHAMPION BREWERIES

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

The idea behind Citigroup and CHAMPION BREWERIES PLC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.