Correlation Between Citigroup and Brickworks
Can any of the company-specific risk be diversified away by investing in both Citigroup and Brickworks 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 Brickworks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Brickworks, you can compare the effects of market volatilities on Citigroup and Brickworks 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 Brickworks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Brickworks.
Diversification Opportunities for Citigroup and Brickworks
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Citigroup and Brickworks is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Brickworks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickworks 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 Brickworks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickworks has no effect on the direction of Citigroup i.e., Citigroup and Brickworks go up and down completely randomly.
Pair Corralation between Citigroup and Brickworks
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.3 times more return on investment than Brickworks. However, Citigroup is 1.3 times more volatile than Brickworks. It trades about 0.07 of its potential returns per unit of risk. Brickworks is currently generating about 0.04 per unit of risk. If you would invest 4,293 in Citigroup on September 3, 2024 and sell it today you would earn a total of 2,794 from holding Citigroup or generate 65.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Citigroup vs. Brickworks
Performance |
| Timeline |
| Citigroup |
| Brickworks |
Citigroup and Brickworks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Brickworks
The main advantage of trading using opposite Citigroup and Brickworks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Brickworks 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 Brickworks will offset losses from the drop in Brickworks' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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