Correlation Between Citigroup and Hensoldt

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

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

Diversification Opportunities for Citigroup and Hensoldt

-0.37

Correlation Coefficient

Citigroup  Hensoldt

Very good diversification

The 3 months correlation between Citigroup and Hensoldt is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hensoldt AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hensoldt AG 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 Hensoldt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hensoldt AG has no effect on the direction of Citigroup i.e., Citigroup and Hensoldt go up and down completely randomly.

Pair Corralation between Citigroup and Hensoldt

Taking into account the 90-day investment horizon Citigroup is expected to generate 20.88 times less return on investment than Hensoldt. But when comparing it to its historical volatility, Citigroup is 3.68 times less risky than Hensoldt. It trades about 0.04 of its potential returns per unit of risk. Hensoldt AG is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,700  in Hensoldt AG on December 21, 2024 and sell it today you would earn a total of  4,895  from holding Hensoldt AG or generate 132.3% return on investment over 90 days.

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

Citigroup  vs.  Hensoldt AG

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Hensoldt AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hensoldt AG are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Hensoldt reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Hensoldt

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

The idea behind Citigroup and Hensoldt 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.