Correlation Between Pesquera Exalmar and Citigroup

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

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

Diversification Opportunities for Pesquera Exalmar and Citigroup

0.73

Correlation Coefficient

Pesquera Exalmar  Citigroup

Poor diversification

The 3 months correlation between Pesquera and Citigroup is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pesquera Exalmar SAA and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Pesquera Exalmar 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 Pesquera Exalmar SAA 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 Pesquera Exalmar i.e., Pesquera Exalmar and Citigroup go up and down completely randomly.

Pair Corralation between Pesquera Exalmar and Citigroup

Assuming the 90 days trading horizon Pesquera Exalmar SAA is expected to generate 1.35 times more return on investment than Citigroup. However, Pesquera Exalmar is 1.35 times more volatile than Citigroup. It trades about 0.5 of its potential returns per unit of risk. Citigroup is currently generating about 0.27 per unit of risk. If you would invest  250.00  in Pesquera Exalmar SAA on October 12, 2024 and sell it today you would earn a total of  8.00  from holding Pesquera Exalmar SAA or generate 3.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	66.67%
Values	Daily Returns

Pesquera Exalmar SAA  vs.  Citigroup

Pesquera Exalmar SAA

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Pesquera Exalmar SAA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady primary indicators, Pesquera Exalmar sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady forward indicators, Citigroup displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pesquera Exalmar and Citigroup

The main advantage of trading using opposite Pesquera Exalmar and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pesquera Exalmar 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 Pesquera Exalmar SAA 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.