Correlation Between Visa and Citigroup

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

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

Diversification Opportunities for Visa and Citigroup

-0.42

Correlation Coefficient

Visa  Citigroup

Very good diversification

The 3 months correlation between Visa and Citigroup is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Visa 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 Visa Class A 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 Visa i.e., Visa and Citigroup go up and down completely randomly.

Pair Corralation between Visa and Citigroup

Taking into account the 90-day investment horizon Visa is expected to generate 3.05 times less return on investment than Citigroup. But when comparing it to its historical volatility, Visa Class A is 2.73 times less risky than Citigroup. It trades about 0.08 of its potential returns per unit of risk. Citigroup is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5,052  in Citigroup on October 26, 2024 and sell it today you would earn a total of  3,153  from holding Citigroup or generate 62.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	46.15%
Values	Daily Returns

Visa Class A  vs.  Citigroup

Visa Class A

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. 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 Visa and Citigroup

The main advantage of trading using opposite Visa and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.