Correlation Between Citigroup and Safran SA

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

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

Diversification Opportunities for Citigroup and Safran SA

0.78

Correlation Coefficient

Citigroup  Safran SA

Poor diversification

The 3 months correlation between Citigroup and Safran is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of Citigroup i.e., Citigroup and Safran SA go up and down completely randomly.

Pair Corralation between Citigroup and Safran SA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.6 times more return on investment than Safran SA. However, Citigroup is 1.6 times more volatile than Safran SA. It trades about 0.15 of its potential returns per unit of risk. Safran SA is currently generating about 0.18 per unit of risk. If you would invest  6,010  in Citigroup on September 5, 2024 and sell it today you would earn a total of  1,140  from holding Citigroup or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  Safran SA

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Safran SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking indicators, Safran SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Safran SA

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

The idea behind Citigroup and Safran SA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.