Correlation Between Citigroup and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Citigroup and Alstom SA 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 Alstom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Alstom SA, you can compare the effects of market volatilities on Citigroup and Alstom SA 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 Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Alstom SA.
Diversification Opportunities for Citigroup and Alstom SA
Poor diversification
The 3 months correlation between Citigroup and Alstom is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA 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 Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Citigroup i.e., Citigroup and Alstom SA go up and down completely randomly.
Pair Corralation between Citigroup and Alstom SA
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.35 times more return on investment than Alstom SA. However, Citigroup is 2.83 times less risky than Alstom SA. It trades about 0.08 of its potential returns per unit of risk. Alstom SA is currently generating about 0.03 per unit of risk. If you would invest 4,054 in Citigroup on September 12, 2024 and sell it today you would earn a total of 3,196 from holding Citigroup or generate 78.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Alstom SA
Performance |
| Timeline |
| Citigroup |
| Alstom SA |
Citigroup and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Alstom SA
The main advantage of trading using opposite Citigroup and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Alstom SA vs. Westinghouse Air Brake | Alstom SA vs. Canadian Pacific Railway | Alstom SA vs. Trinity Industries | Alstom SA vs. CSX Corporation |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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