Correlation Between Citigroup and Kimberly Clark

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

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

Diversification Opportunities for Citigroup and Kimberly Clark

-0.37

Correlation Coefficient

Citigroup  Kimberly Clark

Very good diversification

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

Pair Corralation between Citigroup and Kimberly Clark

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.58 times more return on investment than Kimberly Clark. However, Citigroup is 1.58 times more volatile than Kimberly Clark. It trades about 0.24 of its potential returns per unit of risk. Kimberly Clark is currently generating about -0.02 per unit of risk. If you would invest  6,813  in Citigroup on November 19, 2024 and sell it today you would earn a total of  1,648  from holding Citigroup or generate 24.19% return on investment over 90 days.

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

Citigroup  vs.  Kimberly Clark

Citigroup

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Kimberly Clark

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Kimberly Clark is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Kimberly Clark

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

The idea behind Citigroup and Kimberly Clark 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.