Correlation Between Citigroup and Heineken

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

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

Diversification Opportunities for Citigroup and Heineken

-0.94

Correlation Coefficient

Citigroup  Heineken

Pay attention - limited upside

The 3 months correlation between Citigroup and Heineken is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Heineken NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heineken NV 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 Heineken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heineken NV has no effect on the direction of Citigroup i.e., Citigroup and Heineken go up and down completely randomly.

Pair Corralation between Citigroup and Heineken

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.18 times more return on investment than Heineken. However, Citigroup is 1.18 times more volatile than Heineken NV. It trades about 0.08 of its potential returns per unit of risk. Heineken NV is currently generating about -0.1 per unit of risk. If you would invest  6,975  in Citigroup on September 27, 2024 and sell it today you would earn a total of  125.00  from holding Citigroup or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Heineken NV

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

Heineken NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heineken NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals 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 Heineken

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

The idea behind Citigroup and Heineken NV 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.