Correlation Between Citigroup and Carnival
Can any of the company-specific risk be diversified away by investing in both Citigroup and Carnival 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 Carnival into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Carnival, you can compare the effects of market volatilities on Citigroup and Carnival 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 Carnival. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Carnival.
Diversification Opportunities for Citigroup and Carnival
Very poor diversification
The 3 months correlation between Citigroup and Carnival is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival 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 Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival has no effect on the direction of Citigroup i.e., Citigroup and Carnival go up and down completely randomly.
Pair Corralation between Citigroup and Carnival
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.04 times less return on investment than Carnival. But when comparing it to its historical volatility, Citigroup is 1.8 times less risky than Carnival. It trades about 0.07 of its potential returns per unit of risk. Carnival is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 930.00 in Carnival on August 27, 2024 and sell it today you would earn a total of 1,560 from holding Carnival or generate 167.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Carnival
Performance |
| Timeline |
| Citigroup |
| Carnival |
Citigroup and Carnival Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Carnival
The main advantage of trading using opposite Citigroup and Carnival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Carnival 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 Carnival will offset losses from the drop in Carnival's long position.| Citigroup vs. Nu Holdings | Citigroup vs. HSBC Holdings PLC | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
| Carnival vs. Royal Caribbean Cruises | Carnival vs. Airbnb Inc | Carnival vs. Expedia Group | Carnival vs. Booking 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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