Correlation Between Citigroup and Tekna Holding

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

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

Diversification Opportunities for Citigroup and Tekna Holding

-0.85

Correlation Coefficient

Citigroup  Tekna Holding

Pay attention - limited upside

The 3 months correlation between Citigroup and Tekna is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tekna Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekna Holding AS 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 Tekna Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekna Holding AS has no effect on the direction of Citigroup i.e., Citigroup and Tekna Holding go up and down completely randomly.

Pair Corralation between Citigroup and Tekna Holding

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.67 times less return on investment than Tekna Holding. But when comparing it to its historical volatility, Citigroup is 6.94 times less risky than Tekna Holding. It trades about 0.2 of its potential returns per unit of risk. Tekna Holding AS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Tekna Holding AS on September 16, 2024 and sell it today you would earn a total of  49.00  from holding Tekna Holding AS or generate 14.0% return on investment over 90 days.

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

Citigroup  vs.  Tekna Holding AS

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.

Tekna Holding AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekna Holding AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Citigroup and Tekna Holding

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

The idea behind Citigroup and Tekna Holding AS 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.