Correlation Between Citigroup and Linde PLC

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

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

Diversification Opportunities for Citigroup and Linde PLC

0.67

Correlation Coefficient

Citigroup  Linde PLC

Poor diversification

The 3 months correlation between Citigroup and Linde is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Linde PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde PLC 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 Linde PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde PLC has no effect on the direction of Citigroup i.e., Citigroup and Linde PLC go up and down completely randomly.

Pair Corralation between Citigroup and Linde PLC

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.26 times less return on investment than Linde PLC. In addition to that, Citigroup is 2.05 times more volatile than Linde PLC. It trades about 0.01 of its total potential returns per unit of risk. Linde PLC is currently generating about 0.1 per unit of volatility. If you would invest  40,187  in Linde PLC on December 30, 2024 and sell it today you would earn a total of  2,413  from holding Linde PLC or generate 6.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Citigroup  vs.  Linde PLC

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Linde PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Linde PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Linde PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Linde PLC

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

The idea behind Citigroup and Linde PLC 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 Transaction History module to view history of all your transactions and understand their impact on performance.