Correlation Between Citigroup and Bath Body
Can any of the company-specific risk be diversified away by investing in both Citigroup and Bath Body 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 Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Bath Body Works, you can compare the effects of market volatilities on Citigroup and Bath Body 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 Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Bath Body.
Diversification Opportunities for Citigroup and Bath Body
Poor diversification
The 3 months correlation between Citigroup and Bath is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works 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 Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Citigroup i.e., Citigroup and Bath Body go up and down completely randomly.
Pair Corralation between Citigroup and Bath Body
Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Bath Body. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 2.31 times less risky than Bath Body. The stock trades about -0.09 of its potential returns per unit of risk. The Bath Body Works is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,590 in Bath Body Works on September 24, 2024 and sell it today you would earn a total of 352.00 from holding Bath Body Works or generate 9.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Citigroup vs. Bath Body Works
Performance |
| Timeline |
| Citigroup |
| Bath Body Works |
Citigroup and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Bath Body
The main advantage of trading using opposite Citigroup and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.The idea behind Citigroup and Bath Body Works 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.| Bath Body vs. Uniper SE | Bath Body vs. Mulberry Group PLC | Bath Body vs. London Security Plc | Bath Body vs. Triad Group PLC |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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