Correlation Between Citigroup and Tubacex SA
Can any of the company-specific risk be diversified away by investing in both Citigroup and Tubacex 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 Tubacex SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Tubacex SA, you can compare the effects of market volatilities on Citigroup and Tubacex 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 Tubacex SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Tubacex SA.
Diversification Opportunities for Citigroup and Tubacex SA
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Tubacex is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tubacex SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tubacex 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 Tubacex SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tubacex SA has no effect on the direction of Citigroup i.e., Citigroup and Tubacex SA go up and down completely randomly.
Pair Corralation between Citigroup and Tubacex SA
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.96 times more return on investment than Tubacex SA. However, Citigroup is 1.04 times less risky than Tubacex SA. It trades about 0.21 of its potential returns per unit of risk. Tubacex SA is currently generating about -0.03 per unit of risk. If you would invest 6,360 in Citigroup on August 29, 2024 and sell it today you would earn a total of 615.00 from holding Citigroup or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Tubacex SA
Performance |
| Timeline |
| Citigroup |
| Tubacex SA |
Citigroup and Tubacex SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Tubacex SA
The main advantage of trading using opposite Citigroup and Tubacex SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Tubacex 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 Tubacex SA will offset losses from the drop in Tubacex SA's long position.The idea behind Citigroup and Tubacex SA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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