Correlation Between Citigroup and Experian PLC

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

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

Diversification Opportunities for Citigroup and Experian PLC

-0.75

Correlation Coefficient

Citigroup  Experian PLC

Pay attention - limited upside

The 3 months correlation between Citigroup and Experian is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Experian PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Experian PLC 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 Experian PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Experian PLC has no effect on the direction of Citigroup i.e., Citigroup and Experian PLC go up and down completely randomly.

Pair Corralation between Citigroup and Experian PLC

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.98 times more return on investment than Experian PLC. However, Citigroup is 1.02 times less risky than Experian PLC. It trades about -0.09 of its potential returns per unit of risk. Experian PLC is currently generating about -0.36 per unit of risk. If you would invest  7,075  in Citigroup on September 24, 2024 and sell it today you would lose (156.00) from holding Citigroup or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Experian PLC

Citigroup

Risk-Adjusted Performance

9 of 100

OK

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Experian PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Experian PLC 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 technical and fundamental 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 Experian PLC

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

The idea behind Citigroup and Experian PLC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.