Correlation Between Citigroup and Fidelity Europe

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

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

Diversification Opportunities for Citigroup and Fidelity Europe

0.47

Correlation Coefficient

Citigroup  Fidelity Europe

Very weak diversification

The 3 months correlation between Citigroup and Fidelity is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fidelity Europe Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Europe Quality 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 Fidelity Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Europe Quality has no effect on the direction of Citigroup i.e., Citigroup and Fidelity Europe go up and down completely randomly.

Pair Corralation between Citigroup and Fidelity Europe

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.68 times more return on investment than Fidelity Europe. However, Citigroup is 2.68 times more volatile than Fidelity Europe Quality. It trades about 0.24 of its potential returns per unit of risk. Fidelity Europe Quality is currently generating about 0.19 per unit of risk. If you would invest  7,075  in Citigroup on October 26, 2024 and sell it today you would earn a total of  1,112  from holding Citigroup or generate 15.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.56%
Values	Daily Returns

Citigroup  vs.  Fidelity Europe Quality

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Fidelity Europe Quality

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Europe Quality are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidelity Europe is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Fidelity Europe

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

The idea behind Citigroup and Fidelity Europe Quality 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.