Correlation Between Citigroup and LG Battery
Can any of the company-specific risk be diversified away by investing in both Citigroup and LG Battery 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 LG Battery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and LG Battery Value Chain, you can compare the effects of market volatilities on Citigroup and LG Battery 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 LG Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and LG Battery.
Diversification Opportunities for Citigroup and LG Battery
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and BATT is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LG Battery Value Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Battery Value 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 LG Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Battery Value has no effect on the direction of Citigroup i.e., Citigroup and LG Battery go up and down completely randomly.
Pair Corralation between Citigroup and LG Battery
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.28 times more return on investment than LG Battery. However, Citigroup is 1.28 times more volatile than LG Battery Value Chain. It trades about 0.11 of its potential returns per unit of risk. LG Battery Value Chain is currently generating about 0.02 per unit of risk. If you would invest 4,676 in Citigroup on September 2, 2024 and sell it today you would earn a total of 2,411 from holding Citigroup or generate 51.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. LG Battery Value Chain
Performance |
| Timeline |
| Citigroup |
| LG Battery Value |
Citigroup and LG Battery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and LG Battery
The main advantage of trading using opposite Citigroup and LG Battery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, LG Battery 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 LG Battery will offset losses from the drop in LG Battery's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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