Correlation Between Citigroup and OMX Helsinki

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

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

Diversification Opportunities for Citigroup and OMX Helsinki

0.21

Correlation Coefficient

Citigroup  OMX Helsinki

Modest diversification

The 3 months correlation between Citigroup and OMX is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and OMX Helsinki BenchmarkGI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OMX Helsinki BenchmarkGI 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 OMX Helsinki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OMX Helsinki BenchmarkGI has no effect on the direction of Citigroup i.e., Citigroup and OMX Helsinki go up and down completely randomly.

Pair Corralation between Citigroup and OMX Helsinki

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.84 times less return on investment than OMX Helsinki. In addition to that, Citigroup is 2.38 times more volatile than OMX Helsinki BenchmarkGI. It trades about 0.04 of its total potential returns per unit of risk. OMX Helsinki BenchmarkGI is currently generating about 0.28 per unit of volatility. If you would invest  13,577  in OMX Helsinki BenchmarkGI on December 21, 2024 and sell it today you would earn a total of  1,979  from holding OMX Helsinki BenchmarkGI or generate 14.58% return on investment over 90 days.

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

Citigroup  vs.  OMX Helsinki BenchmarkGI

Pair Trading with Citigroup and OMX Helsinki

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

The idea behind Citigroup and OMX Helsinki BenchmarkGI 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.