Correlation Between Citigroup and Relx PLC
Can any of the company-specific risk be diversified away by investing in both Citigroup and Relx 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 Relx PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Relx PLC ADR, you can compare the effects of market volatilities on Citigroup and Relx 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 Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Relx PLC.
Diversification Opportunities for Citigroup and Relx PLC
Poor diversification
The 3 months correlation between Citigroup and Relx is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of Citigroup i.e., Citigroup and Relx PLC go up and down completely randomly.
Pair Corralation between Citigroup and Relx PLC
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times less return on investment than Relx PLC. In addition to that, Citigroup is 1.42 times more volatile than Relx PLC ADR. It trades about 0.06 of its total potential returns per unit of risk. Relx PLC ADR is currently generating about 0.1 per unit of volatility. If you would invest 2,587 in Relx PLC ADR on September 27, 2024 and sell it today you would earn a total of 1,773 from holding Relx PLC ADR or generate 68.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.76% |
| Values | Daily Returns |
Citigroup vs. Relx PLC ADR
Performance |
| Timeline |
| Citigroup |
| Relx PLC ADR |
Citigroup and Relx PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Relx PLC
The main advantage of trading using opposite Citigroup and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Relx 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 Relx PLC will offset losses from the drop in Relx PLC's long position.The idea behind Citigroup and Relx 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.| Relx PLC vs. RELX PLC | Relx PLC vs. Wolters Kluwer NV | Relx PLC vs. WOLTERS KLUWER ADR | Relx PLC vs. Informa PLC |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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