Correlation Between Citigroup and ERAMET SA

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

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

Diversification Opportunities for Citigroup and ERAMET SA

-0.69

Correlation Coefficient

Citigroup  ERAMET SA

Excellent diversification

The 3 months correlation between Citigroup and ERAMET is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET SA 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 ERAMET SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERAMET SA has no effect on the direction of Citigroup i.e., Citigroup and ERAMET SA go up and down completely randomly.

Pair Corralation between Citigroup and ERAMET SA

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.37 times more return on investment than ERAMET SA. However, Citigroup is 2.68 times less risky than ERAMET SA. It trades about 0.07 of its potential returns per unit of risk. ERAMET SA is currently generating about 0.0 per unit of risk. If you would invest  4,293  in Citigroup on September 3, 2024 and sell it today you would earn a total of  2,794  from holding Citigroup or generate 65.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	65.25%
Values	Daily Returns

Citigroup  vs.  ERAMET SA

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

ERAMET SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ERAMET SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and ERAMET SA

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

The idea behind Citigroup and ERAMET SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.