Correlation Between Citigroup and Telenor ASA

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

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

Diversification Opportunities for Citigroup and Telenor ASA

-0.69

Correlation Coefficient

Citigroup  Telenor ASA

Excellent diversification

The 3 months correlation between Citigroup and Telenor is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of Citigroup i.e., Citigroup and Telenor ASA go up and down completely randomly.

Pair Corralation between Citigroup and Telenor ASA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.14 times less return on investment than Telenor ASA. But when comparing it to its historical volatility, Citigroup is 2.52 times less risky than Telenor ASA. It trades about 0.07 of its potential returns per unit of risk. Telenor ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  924.00  in Telenor ASA on September 25, 2024 and sell it today you would earn a total of  157.00  from holding Telenor ASA or generate 16.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.63%
Values	Daily Returns

Citigroup  vs.  Telenor ASA

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Telenor ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and Telenor ASA

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

The idea behind Citigroup and Telenor ASA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.