Correlation Between Citigroup and Companhia Energética

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

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

Diversification Opportunities for Citigroup and Companhia Energética

0.24

Correlation Coefficient

Citigroup  Companhia Energética

Modest diversification

The 3 months correlation between Citigroup and Companhia is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energética 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 Companhia Energética. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energética has no effect on the direction of Citigroup i.e., Citigroup and Companhia Energética go up and down completely randomly.

Pair Corralation between Citigroup and Companhia Energética

Taking into account the 90-day investment horizon Citigroup is expected to generate 13.21 times less return on investment than Companhia Energética. But when comparing it to its historical volatility, Citigroup is 2.75 times less risky than Companhia Energética. It trades about 0.04 of its potential returns per unit of risk. Companhia Energtica de is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  156.00  in Companhia Energtica de on October 11, 2024 and sell it today you would earn a total of  21.00  from holding Companhia Energtica de or generate 13.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Citigroup  vs.  Companhia Energtica de

Citigroup

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Companhia Energética

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Companhia Energética reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Companhia Energética

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

The idea behind Citigroup and Companhia Energtica de 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.