Correlation Between Citigroup and Leeuwin Metals

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

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

Diversification Opportunities for Citigroup and Leeuwin Metals

0.61

Correlation Coefficient

Citigroup  Leeuwin Metals

Poor diversification

The 3 months correlation between Citigroup and Leeuwin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin Metals 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 Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of Citigroup i.e., Citigroup and Leeuwin Metals go up and down completely randomly.

Pair Corralation between Citigroup and Leeuwin Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 9.82 times less return on investment than Leeuwin Metals. But when comparing it to its historical volatility, Citigroup is 7.29 times less risky than Leeuwin Metals. It trades about 0.09 of its potential returns per unit of risk. Leeuwin Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Leeuwin Metals on December 3, 2024 and sell it today you would earn a total of  5.00  from holding Leeuwin Metals or generate 71.43% return on investment over 90 days.

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

Citigroup  vs.  Leeuwin Metals

Citigroup

Risk-Adjusted Performance

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 April 2025.

Leeuwin Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leeuwin Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leeuwin Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Leeuwin Metals

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

The idea behind Citigroup and Leeuwin Metals 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.