Correlation Between Citigroup and LOréal SA
Can any of the company-specific risk be diversified away by investing in both Citigroup and LOréal 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 LOréal SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and LOral SA, you can compare the effects of market volatilities on Citigroup and LOréal 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 LOréal SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and LOréal SA.
Diversification Opportunities for Citigroup and LOréal SA
Pay attention - limited upside
The 3 months correlation between Citigroup and LOréal is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOréal 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 LOréal SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOréal SA has no effect on the direction of Citigroup i.e., Citigroup and LOréal SA go up and down completely randomly.
Pair Corralation between Citigroup and LOréal SA
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.87 times more return on investment than LOréal SA. However, Citigroup is 1.14 times less risky than LOréal SA. It trades about 0.07 of its potential returns per unit of risk. LOral SA is currently generating about 0.0 per unit of risk. If you would invest 4,206 in Citigroup on August 24, 2024 and sell it today you would earn a total of 2,778 from holding Citigroup or generate 66.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. LOral SA
Performance |
| Timeline |
| Citigroup |
| LOréal SA |
Citigroup and LOréal SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and LOréal SA
The main advantage of trading using opposite Citigroup and LOréal SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, LOréal 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 LOréal SA will offset losses from the drop in LOréal SA's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| LOréal SA vs. Inter Parfums | LOréal SA vs. European Wax Center | LOréal SA vs. Estee Lauder Companies | LOréal SA vs. Reckitt Benckiser Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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