Correlation Between Citigroup and Solvay SA

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

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

Diversification Opportunities for Citigroup and Solvay SA

-0.15

Correlation Coefficient

Citigroup  Solvay SA

Good diversification

The 3 months correlation between Citigroup and Solvay is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay 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 Solvay SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay SA has no effect on the direction of Citigroup i.e., Citigroup and Solvay SA go up and down completely randomly.

Pair Corralation between Citigroup and Solvay SA

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.83 times more return on investment than Solvay SA. However, Citigroup is 1.21 times less risky than Solvay SA. It trades about 0.21 of its potential returns per unit of risk. Solvay SA is currently generating about -0.23 per unit of risk. If you would invest  6,393  in Citigroup on August 31, 2024 and sell it today you would earn a total of  623.00  from holding Citigroup or generate 9.75% return on investment over 90 days.

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

Citigroup  vs.  Solvay SA

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.

Solvay SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Solvay SA is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Solvay SA

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

The idea behind Citigroup and Solvay 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.