Correlation Between Citigroup and Emerging Markets

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

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

Diversification Opportunities for Citigroup and Emerging Markets

-0.16

Correlation Coefficient

Citigroup  Emerging Markets

Good diversification

The 3 months correlation between Citigroup and Emerging is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Emerging Markets Sustainabilit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Sus 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Sus has no effect on the direction of Citigroup i.e., Citigroup and Emerging Markets go up and down completely randomly.

Pair Corralation between Citigroup and Emerging Markets

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.71 times more return on investment than Emerging Markets. However, Citigroup is 1.71 times more volatile than Emerging Markets Sustainability. It trades about 0.2 of its potential returns per unit of risk. Emerging Markets Sustainability is currently generating about 0.19 per unit of risk. If you would invest  6,902  in Citigroup on September 13, 2024 and sell it today you would earn a total of  241.00  from holding Citigroup or generate 3.49% return on investment over 90 days.

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

Citigroup  vs.  Emerging Markets Sustainabilit

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Emerging Markets Sus

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Sustainability are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Emerging Markets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Emerging Markets

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

The idea behind Citigroup and Emerging Markets Sustainability 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.