Correlation Between Citigroup and Rocket Internet
Can any of the company-specific risk be diversified away by investing in both Citigroup and Rocket Internet 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 Rocket Internet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Rocket Internet SE, you can compare the effects of market volatilities on Citigroup and Rocket Internet 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 Rocket Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Rocket Internet.
Diversification Opportunities for Citigroup and Rocket Internet
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and Rocket is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE 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 Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of Citigroup i.e., Citigroup and Rocket Internet go up and down completely randomly.
Pair Corralation between Citigroup and Rocket Internet
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.93 times more return on investment than Rocket Internet. However, Citigroup is 1.07 times less risky than Rocket Internet. It trades about 0.07 of its potential returns per unit of risk. Rocket Internet SE is currently generating about -0.03 per unit of risk. If you would invest 4,293 in Citigroup on September 3, 2024 and sell it today you would earn a total of 2,794 from holding Citigroup or generate 65.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.02% |
| Values | Daily Returns |
Citigroup vs. Rocket Internet SE
Performance |
| Timeline |
| Citigroup |
| Rocket Internet SE |
Citigroup and Rocket Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Rocket Internet
The main advantage of trading using opposite Citigroup and Rocket Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Rocket Internet 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 Rocket Internet will offset losses from the drop in Rocket Internet's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Rocket Internet as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Rocket Internet's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Rocket Internet's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Rocket Internet SE.
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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