Correlation Between Citigroup and LEGAL GENERAL

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

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

Diversification Opportunities for Citigroup and LEGAL GENERAL

0.64

Correlation Coefficient

Citigroup  LEGAL GENERAL

Poor diversification

The 3 months correlation between Citigroup and LEGAL is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LEGAL GENERAL UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEGAL GENERAL UCITS 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 LEGAL GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEGAL GENERAL UCITS has no effect on the direction of Citigroup i.e., Citigroup and LEGAL GENERAL go up and down completely randomly.

Pair Corralation between Citigroup and LEGAL GENERAL

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times less return on investment than LEGAL GENERAL. In addition to that, Citigroup is 3.21 times more volatile than LEGAL GENERAL UCITS. It trades about 0.04 of its total potential returns per unit of risk. LEGAL GENERAL UCITS is currently generating about 0.16 per unit of volatility. If you would invest  100,670  in LEGAL GENERAL UCITS on December 20, 2024 and sell it today you would earn a total of  6,130  from holding LEGAL GENERAL UCITS or generate 6.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  LEGAL GENERAL UCITS

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

LEGAL GENERAL UCITS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LEGAL GENERAL UCITS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, LEGAL GENERAL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and LEGAL GENERAL

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

The idea behind Citigroup and LEGAL GENERAL UCITS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.