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 Group, 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

0.47

Correlation Coefficient

Citigroup  Investec

Very weak diversification

The 3 months correlation between Citigroup and Investec is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Investec Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Group 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 Group 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 4.39 times more return on investment than Investec. However, Citigroup is 4.39 times more volatile than Investec Group. It trades about 0.06 of its potential returns per unit of risk. Investec Group is currently generating about 0.09 per unit of risk. If you would invest  4,790  in Citigroup on October 13, 2024 and sell it today you would earn a total of  2,350  from holding Citigroup or generate 49.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  Investec Group

Citigroup

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Investec Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, Investec is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 Group 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.