Correlation Between Citigroup and Lara Exploration

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

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

Diversification Opportunities for Citigroup and Lara Exploration

-0.25

Correlation Coefficient

Citigroup  Lara Exploration

Very good diversification

The 3 months correlation between Citigroup and Lara is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lara Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lara Exploration 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 Lara Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lara Exploration has no effect on the direction of Citigroup i.e., Citigroup and Lara Exploration go up and down completely randomly.

Pair Corralation between Citigroup and Lara Exploration

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.36 times more return on investment than Lara Exploration. However, Citigroup is 2.79 times less risky than Lara Exploration. It trades about 0.28 of its potential returns per unit of risk. Lara Exploration is currently generating about -0.01 per unit of risk. If you would invest  6,122  in Citigroup on October 25, 2024 and sell it today you would earn a total of  2,047  from holding Citigroup or generate 33.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  Lara Exploration

Citigroup

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 21 (%) 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.

Lara Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lara Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lara Exploration is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Lara Exploration

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

The idea behind Citigroup and Lara Exploration 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.