Correlation Between Citigroup and WESTPAC CPS

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

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

Diversification Opportunities for Citigroup and WESTPAC CPS

0.0

Correlation Coefficient

Citigroup  WESTPAC CPS

Pay attention - limited upside

The 3 months correlation between Citigroup and WESTPAC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WESTPAC CPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTPAC CPS 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 WESTPAC CPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTPAC CPS has no effect on the direction of Citigroup i.e., Citigroup and WESTPAC CPS go up and down completely randomly.

Pair Corralation between Citigroup and WESTPAC CPS

If you would invest  4,733  in Citigroup on October 26, 2024 and sell it today you would earn a total of  3,415  from holding Citigroup or generate 72.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Citigroup  vs.  WESTPAC CPS

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

WESTPAC CPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTPAC CPS has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound basic indicators, WESTPAC CPS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and WESTPAC CPS

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

The idea behind Citigroup and WESTPAC CPS 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.