Correlation Between Citigroup and ABB PAR
Can any of the company-specific risk be diversified away by investing in both Citigroup and ABB PAR 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 ABB PAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and ABB PAR AB, you can compare the effects of market volatilities on Citigroup and ABB PAR 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 ABB PAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and ABB PAR.
Diversification Opportunities for Citigroup and ABB PAR
Very good diversification
The 3 months correlation between Citigroup and ABB is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ABB PAR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB PAR AB 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 ABB PAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB PAR AB has no effect on the direction of Citigroup i.e., Citigroup and ABB PAR go up and down completely randomly.
Pair Corralation between Citigroup and ABB PAR
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.77 times more return on investment than ABB PAR. However, Citigroup is 1.3 times less risky than ABB PAR. It trades about 0.07 of its potential returns per unit of risk. ABB PAR AB is currently generating about 0.03 per unit of risk. If you would invest 4,381 in Citigroup on September 28, 2024 and sell it today you would earn a total of 2,694 from holding Citigroup or generate 61.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 98.61% |
| Values | Daily Returns |
Citigroup vs. ABB PAR AB
Performance |
| Timeline |
| Citigroup |
| ABB PAR AB |
Citigroup and ABB PAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and ABB PAR
The main advantage of trading using opposite Citigroup and ABB PAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, ABB PAR 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 ABB PAR will offset losses from the drop in ABB PAR's long position.The idea behind Citigroup and ABB PAR AB 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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