Correlation Between Citigroup and Tele2 AB
Can any of the company-specific risk be diversified away by investing in both Citigroup and Tele2 AB 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 Tele2 AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Tele2 AB, you can compare the effects of market volatilities on Citigroup and Tele2 AB 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 Tele2 AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Tele2 AB.
Diversification Opportunities for Citigroup and Tele2 AB
Excellent diversification
The 3 months correlation between Citigroup and Tele2 is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tele2 AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tele2 AB 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 Tele2 AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tele2 AB has no effect on the direction of Citigroup i.e., Citigroup and Tele2 AB go up and down completely randomly.
Pair Corralation between Citigroup and Tele2 AB
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.79 times more return on investment than Tele2 AB. However, Citigroup is 1.26 times less risky than Tele2 AB. It trades about 0.11 of its potential returns per unit of risk. Tele2 AB is currently generating about 0.06 per unit of risk. If you would invest 4,567 in Citigroup on August 29, 2024 and sell it today you would earn a total of 2,408 from holding Citigroup or generate 52.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Citigroup vs. Tele2 AB
Performance |
| Timeline |
| Citigroup |
| Tele2 AB |
Citigroup and Tele2 AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Tele2 AB
The main advantage of trading using opposite Citigroup and Tele2 AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Tele2 AB 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 Tele2 AB will offset losses from the drop in Tele2 AB's long position.The idea behind Citigroup and Tele2 AB 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.| Tele2 AB vs. Proximus NV ADR | Tele2 AB vs. Telstra Limited | Tele2 AB vs. Singapore Telecommunications Limited | Tele2 AB vs. Vodafone Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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