Correlation Between Citigroup and LVMH Moët

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

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

Diversification Opportunities for Citigroup and LVMH Moët

0.89

Correlation Coefficient

Citigroup  LVMH Moët

Very poor diversification

The 3 months correlation between Citigroup and LVMH is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Moët. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Citigroup i.e., Citigroup and LVMH Moët go up and down completely randomly.

Pair Corralation between Citigroup and LVMH Moët

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.0 times more return on investment than LVMH Moët. However, Citigroup is 1.0 times more volatile than LVMH Mot Hennessy. It trades about 0.04 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.02 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.97% return on investment over 90 days.

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

Citigroup  vs.  LVMH Mot Hennessy

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

LVMH Mot Hennessy

Risk-Adjusted Performance

Very Weak

Over the last 90 days LVMH Mot Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, LVMH Moët is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and LVMH Moët

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

The idea behind Citigroup and LVMH Mot Hennessy 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.