Correlation Between Lyxor 1 and Citigroup

Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Citigroup 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 Lyxor 1 and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lyxor 1 and Citigroup, you can compare the effects of market volatilities on Lyxor 1 and Citigroup 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 Lyxor 1 with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Citigroup.

Diversification Opportunities for Lyxor 1 and Citigroup

0.43

Correlation Coefficient

Lyxor 1  Citigroup

Very weak diversification

The 3 months correlation between Lyxor and Citigroup is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Lyxor 1 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 Lyxor 1 are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Citigroup go up and down completely randomly.

Pair Corralation between Lyxor 1 and Citigroup

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 11.76 times less return on investment than Citigroup. But when comparing it to its historical volatility, Lyxor 1 is 1.81 times less risky than Citigroup. It trades about 0.01 of its potential returns per unit of risk. Citigroup is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,231  in Citigroup on October 7, 2024 and sell it today you would earn a total of  2,605  from holding Citigroup or generate 61.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lyxor 1   vs.  Citigroup

Lyxor 1

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor 1 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor 1 and Citigroup

The main advantage of trading using opposite Lyxor 1 and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.

The idea behind Lyxor 1 and Citigroup 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.