Correlation Between Citigroup and Whirlpool

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

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

Diversification Opportunities for Citigroup and Whirlpool

-0.44

Correlation Coefficient

Citigroup  Whirlpool

Very good diversification

The 3 months correlation between Citigroup and Whirlpool is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Whirlpool SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool SA 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool SA has no effect on the direction of Citigroup i.e., Citigroup and Whirlpool go up and down completely randomly.

Pair Corralation between Citigroup and Whirlpool

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.14 times less return on investment than Whirlpool. But when comparing it to its historical volatility, Citigroup is 3.41 times less risky than Whirlpool. It trades about 0.25 of its potential returns per unit of risk. Whirlpool SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  409.00  in Whirlpool SA on September 15, 2024 and sell it today you would earn a total of  16.00  from holding Whirlpool SA or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Whirlpool SA

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Whirlpool SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whirlpool SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Whirlpool is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Whirlpool

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

The idea behind Citigroup and Whirlpool SA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.