Correlation Between Citigroup and Compania Minera

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

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

Diversification Opportunities for Citigroup and Compania Minera

-0.05

Correlation Coefficient

Citigroup  Compania Minera

Good diversification

The 3 months correlation between Citigroup and Compania is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Compania Minera Poderosa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Minera Poderosa 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 Compania Minera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Minera Poderosa has no effect on the direction of Citigroup i.e., Citigroup and Compania Minera go up and down completely randomly.

Pair Corralation between Citigroup and Compania Minera

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.97 times more return on investment than Compania Minera. However, Citigroup is 1.03 times less risky than Compania Minera. It trades about 0.07 of its potential returns per unit of risk. Compania Minera Poderosa is currently generating about -0.11 per unit of risk. If you would invest  7,196  in Citigroup on October 12, 2024 and sell it today you would earn a total of  130.00  from holding Citigroup or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  Compania Minera Poderosa

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compania Minera Poderosa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania Minera Poderosa has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Compania Minera is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Compania Minera

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

The idea behind Citigroup and Compania Minera Poderosa 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 Transaction History module to view history of all your transactions and understand their impact on performance.