Correlation Between Citigroup and Investec

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

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

Diversification Opportunities for Citigroup and Investec

-0.01

Correlation Coefficient

Citigroup  Investec

Good diversification

The 3 months correlation between Citigroup and Investec is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of Citigroup i.e., Citigroup and Investec go up and down completely randomly.

Pair Corralation between Citigroup and Investec

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.08 times more return on investment than Investec. However, Citigroup is 1.08 times more volatile than Investec. It trades about 0.07 of its potential returns per unit of risk. Investec is currently generating about 0.04 per unit of risk. If you would invest  4,168  in Citigroup on September 20, 2024 and sell it today you would earn a total of  2,674  from holding Citigroup or generate 64.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Citigroup  vs.  Investec

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Investec

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

The idea behind Citigroup and Investec 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.