Correlation Between Citigroup and Pan American

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

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

Diversification Opportunities for Citigroup and Pan American

0.59

Correlation Coefficient

Citigroup  Pan American

Very weak diversification

The 3 months correlation between Citigroup and Pan is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pan American Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan American Silver 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 Pan American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan American Silver has no effect on the direction of Citigroup i.e., Citigroup and Pan American go up and down completely randomly.

Pair Corralation between Citigroup and Pan American

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.11 times less return on investment than Pan American. But when comparing it to its historical volatility, Citigroup is 1.67 times less risky than Pan American. It trades about 0.08 of its potential returns per unit of risk. Pan American Silver is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,417  in Pan American Silver on November 19, 2024 and sell it today you would earn a total of  1,029  from holding Pan American Silver or generate 72.62% return on investment over 90 days.

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

Citigroup  vs.  Pan American Silver

Citigroup

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Pan American Silver

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pan American Silver are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pan American may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Citigroup and Pan American

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

The idea behind Citigroup and Pan American Silver 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.