Correlation Between Citigroup and SERENDIB HOTELS

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

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

Diversification Opportunities for Citigroup and SERENDIB HOTELS

0.78

Correlation Coefficient

Citigroup  SERENDIB HOTELS

Poor diversification

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

Pair Corralation between Citigroup and SERENDIB HOTELS

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the SERENDIB HOTELS. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 2.31 times less risky than SERENDIB HOTELS. The stock trades about -0.06 of its potential returns per unit of risk. The SERENDIB HOTELS PLC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,260  in SERENDIB HOTELS PLC on October 7, 2024 and sell it today you would earn a total of  190.00  from holding SERENDIB HOTELS PLC or generate 15.08% return on investment over 90 days.

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

Citigroup  vs.  SERENDIB HOTELS PLC

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

SERENDIB HOTELS PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SERENDIB HOTELS PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SERENDIB HOTELS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and SERENDIB HOTELS

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

The idea behind Citigroup and SERENDIB HOTELS PLC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.