Correlation Between Citigroup and VONOVIA SE

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

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

Diversification Opportunities for Citigroup and VONOVIA SE

-0.5

Correlation Coefficient

Citigroup  VONOVIA SE

Very good diversification

The 3 months correlation between Citigroup and VONOVIA is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VONOVIA SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VONOVIA SE ADR 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 VONOVIA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VONOVIA SE ADR has no effect on the direction of Citigroup i.e., Citigroup and VONOVIA SE go up and down completely randomly.

Pair Corralation between Citigroup and VONOVIA SE

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.13 times less return on investment than VONOVIA SE. But when comparing it to its historical volatility, Citigroup is 1.85 times less risky than VONOVIA SE. It trades about 0.07 of its potential returns per unit of risk. VONOVIA SE ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  929.00  in VONOVIA SE ADR on September 23, 2024 and sell it today you would earn a total of  481.00  from holding VONOVIA SE ADR or generate 51.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.03%
Values	Daily Returns

Citigroup  vs.  VONOVIA SE ADR

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 uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and VONOVIA SE

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

The idea behind Citigroup and VONOVIA SE ADR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.