Correlation Between Citigroup and Telia Company

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

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

Diversification Opportunities for Citigroup and Telia Company

0.57

Correlation Coefficient

Citigroup  Telia Company

Very weak diversification

The 3 months correlation between Citigroup and Telia is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Citigroup i.e., Citigroup and Telia Company go up and down completely randomly.

Pair Corralation between Citigroup and Telia Company

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.91 times more return on investment than Telia Company. However, Citigroup is 1.1 times less risky than Telia Company. It trades about 0.06 of its potential returns per unit of risk. Telia Company AB is currently generating about -0.29 per unit of risk. If you would invest  4,790  in Citigroup on October 14, 2024 and sell it today you would earn a total of  2,350  from holding Citigroup or generate 49.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	3.02%
Values	Daily Returns

Citigroup  vs.  Telia Company AB

Citigroup

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Telia Company 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 Telia Company

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

The idea behind Citigroup and Telia Company AB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.