Correlation Between Citigroup and EasyJet PLC
Can any of the company-specific risk be diversified away by investing in both Citigroup and EasyJet PLC 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 EasyJet PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and EasyJet PLC, you can compare the effects of market volatilities on Citigroup and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and EasyJet PLC.
Diversification Opportunities for Citigroup and EasyJet PLC
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and EasyJet is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Citigroup i.e., Citigroup and EasyJet PLC go up and down completely randomly.
Pair Corralation between Citigroup and EasyJet PLC
Taking into account the 90-day investment horizon Citigroup is expected to under-perform the EasyJet PLC. In addition to that, Citigroup is 1.05 times more volatile than EasyJet PLC. It trades about -0.09 of its total potential returns per unit of risk. EasyJet PLC is currently generating about 0.26 per unit of volatility. If you would invest 53,840 in EasyJet PLC on September 24, 2024 and sell it today you would earn a total of 3,320 from holding EasyJet PLC or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Citigroup vs. EasyJet PLC
Performance |
| Timeline |
| Citigroup |
| EasyJet PLC |
Citigroup and EasyJet PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and EasyJet PLC
The main advantage of trading using opposite Citigroup and EasyJet PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, EasyJet PLC 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 EasyJet PLC will offset losses from the drop in EasyJet PLC's long position.The idea behind Citigroup and EasyJet PLC 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.| EasyJet PLC vs. Quadrise Plc | EasyJet PLC vs. ImmuPharma PLC | EasyJet PLC vs. Intuitive Investments Group | EasyJet PLC vs. European Metals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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