Correlation Between Citigroup and AS Latvijas

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

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

Diversification Opportunities for Citigroup and AS Latvijas

0.85

Correlation Coefficient

Citigroup  AS Latvijas

Very poor diversification

The 3 months correlation between Citigroup and UM9 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and AS Latvijas balzams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AS Latvijas balzams 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 AS Latvijas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AS Latvijas balzams has no effect on the direction of Citigroup i.e., Citigroup and AS Latvijas go up and down completely randomly.

Pair Corralation between Citigroup and AS Latvijas

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.82 times more return on investment than AS Latvijas. However, Citigroup is 8.82 times more volatile than AS Latvijas balzams. It trades about 0.11 of its potential returns per unit of risk. AS Latvijas balzams is currently generating about -0.01 per unit of risk. If you would invest  4,325  in Citigroup on September 23, 2024 and sell it today you would earn a total of  2,594  from holding Citigroup or generate 59.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.54%
Values	Daily Returns

Citigroup  vs.  AS Latvijas balzams

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AS Latvijas balzams

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AS Latvijas balzams are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AS Latvijas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and AS Latvijas

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

The idea behind Citigroup and AS Latvijas balzams 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.