Correlation Between Citigroup and Reckitt Benckiser

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

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

Diversification Opportunities for Citigroup and Reckitt Benckiser

-0.21

Correlation Coefficient

Citigroup  Reckitt Benckiser

Very good diversification

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

Pair Corralation between Citigroup and Reckitt Benckiser

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than Reckitt Benckiser. However, Citigroup is 1.65 times less risky than Reckitt Benckiser. It trades about 0.1 of its potential returns per unit of risk. Reckitt Benckiser Group is currently generating about 0.0 per unit of risk. If you would invest  4,903  in Citigroup on September 17, 2024 and sell it today you would earn a total of  2,198  from holding Citigroup or generate 44.83% return on investment over 90 days.

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

Citigroup  vs.  Reckitt Benckiser Group

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Reckitt Benckiser

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reckitt Benckiser Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Reckitt Benckiser is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Reckitt Benckiser

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

The idea behind Citigroup and Reckitt Benckiser Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.