Correlation Between Citigroup and CAC All

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

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

Diversification Opportunities for Citigroup and CAC All

0.07

Correlation Coefficient

Citigroup  CAC All

Significant diversification

The 3 months correlation between Citigroup and CAC is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CAC All Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAC All Shares 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 CAC All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAC All Shares has no effect on the direction of Citigroup i.e., Citigroup and CAC All go up and down completely randomly.

Pair Corralation between Citigroup and CAC All

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.11 times more return on investment than CAC All. However, Citigroup is 2.11 times more volatile than CAC All Shares. It trades about 0.24 of its potential returns per unit of risk. CAC All Shares is currently generating about 0.07 per unit of risk. If you would invest  6,129  in Citigroup on October 20, 2024 and sell it today you would earn a total of  1,870  from holding Citigroup or generate 30.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  CAC All Shares

Pair Trading with Citigroup and CAC All

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

The idea behind Citigroup and CAC All Shares 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.