Correlation Between Citigroup and Deka MDAX

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

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

Diversification Opportunities for Citigroup and Deka MDAX

-0.12

Correlation Coefficient

Citigroup  Deka MDAX

Good diversification

The 3 months correlation between Citigroup and Deka is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Deka MDAX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka MDAX 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 Deka MDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka MDAX UCITS has no effect on the direction of Citigroup i.e., Citigroup and Deka MDAX go up and down completely randomly.

Pair Corralation between Citigroup and Deka MDAX

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.52 times more return on investment than Deka MDAX. However, Citigroup is 1.52 times more volatile than Deka MDAX UCITS. It trades about -0.04 of its potential returns per unit of risk. Deka MDAX UCITS is currently generating about -0.07 per unit of risk. If you would invest  6,900  in Citigroup on September 19, 2024 and sell it today you would lose (88.00) from holding Citigroup or give up 1.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Deka MDAX UCITS

Citigroup

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deka MDAX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka MDAX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Deka MDAX is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Deka MDAX

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

The idea behind Citigroup and Deka MDAX 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.