Correlation Between Citigroup and Grupo Simec

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

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

Diversification Opportunities for Citigroup and Grupo Simec

-0.3

Correlation Coefficient

Citigroup  Grupo Simec

Very good diversification

The 3 months correlation between Citigroup and Grupo is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Grupo Simec SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Simec SAB 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 Grupo Simec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Simec SAB has no effect on the direction of Citigroup i.e., Citigroup and Grupo Simec go up and down completely randomly.

Pair Corralation between Citigroup and Grupo Simec

Taking into account the 90-day investment horizon Citigroup is expected to generate 12.43 times more return on investment than Grupo Simec. However, Citigroup is 12.43 times more volatile than Grupo Simec SAB. It trades about 0.09 of its potential returns per unit of risk. Grupo Simec SAB is currently generating about -0.14 per unit of risk. If you would invest  6,975  in Citigroup on September 27, 2024 and sell it today you would earn a total of  160.00  from holding Citigroup or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Grupo Simec SAB

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Grupo Simec SAB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and Grupo Simec

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

The idea behind Citigroup and Grupo Simec SAB 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.