Correlation Between Citigroup and Mondi PLC
Can any of the company-specific risk be diversified away by investing in both Citigroup and Mondi 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 Mondi PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Mondi PLC ADR, you can compare the effects of market volatilities on Citigroup and Mondi 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 Mondi PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Mondi PLC.
Diversification Opportunities for Citigroup and Mondi PLC
Pay attention - limited upside
The 3 months correlation between Citigroup and Mondi is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Mondi PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondi PLC ADR 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 Mondi PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondi PLC ADR has no effect on the direction of Citigroup i.e., Citigroup and Mondi PLC go up and down completely randomly.
Pair Corralation between Citigroup and Mondi PLC
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.0 times more return on investment than Mondi PLC. However, Citigroup is 1.0 times less risky than Mondi PLC. It trades about 0.11 of its potential returns per unit of risk. Mondi PLC ADR is currently generating about -0.2 per unit of risk. If you would invest 6,134 in Citigroup on August 29, 2024 and sell it today you would earn a total of 841.00 from holding Citigroup or generate 13.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Mondi PLC ADR
Performance |
| Timeline |
| Citigroup |
| Mondi PLC ADR |
Citigroup and Mondi PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Mondi PLC
The main advantage of trading using opposite Citigroup and Mondi PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Mondi 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 Mondi PLC will offset losses from the drop in Mondi PLC's long position.The idea behind Citigroup and Mondi PLC ADR 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.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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