Correlation Between Citigroup and Heidelberg Materials

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

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

Diversification Opportunities for Citigroup and Heidelberg Materials

0.89

Correlation Coefficient

Citigroup  Heidelberg Materials

Very poor diversification

The 3 months correlation between Citigroup and Heidelberg is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Citigroup i.e., Citigroup and Heidelberg Materials go up and down completely randomly.

Pair Corralation between Citigroup and Heidelberg Materials

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.94 times more return on investment than Heidelberg Materials. However, Citigroup is 1.07 times less risky than Heidelberg Materials. It trades about 0.1 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.0 per unit of risk. If you would invest  7,186  in Citigroup on October 9, 2024 and sell it today you would earn a total of  182.00  from holding Citigroup or generate 2.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	85.0%
Values	Daily Returns

Citigroup  vs.  Heidelberg Materials AG

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.

Heidelberg Materials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Heidelberg Materials exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Heidelberg Materials

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

The idea behind Citigroup and Heidelberg Materials AG 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.