Correlation Between Citigroup and Wesfarmers
Can any of the company-specific risk be diversified away by investing in both Citigroup and Wesfarmers 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 Wesfarmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Wesfarmers, you can compare the effects of market volatilities on Citigroup and Wesfarmers 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 Wesfarmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Wesfarmers.
Diversification Opportunities for Citigroup and Wesfarmers
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Citigroup and Wesfarmers is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Wesfarmers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesfarmers 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 Wesfarmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesfarmers has no effect on the direction of Citigroup i.e., Citigroup and Wesfarmers go up and down completely randomly.
Pair Corralation between Citigroup and Wesfarmers
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.46 times more return on investment than Wesfarmers. However, Citigroup is 1.46 times more volatile than Wesfarmers. It trades about 0.12 of its potential returns per unit of risk. Wesfarmers is currently generating about 0.1 per unit of risk. If you would invest 3,936 in Citigroup on August 29, 2024 and sell it today you would earn a total of 3,080 from holding Citigroup or generate 78.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.05% |
| Values | Daily Returns |
Citigroup vs. Wesfarmers
Performance |
| Timeline |
| Citigroup |
| Wesfarmers |
Citigroup and Wesfarmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Wesfarmers
The main advantage of trading using opposite Citigroup and Wesfarmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Wesfarmers 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 Wesfarmers will offset losses from the drop in Wesfarmers' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Wesfarmers vs. Mirrabooka Investments | Wesfarmers vs. Garda Diversified Ppty | Wesfarmers vs. Regal Investment | Wesfarmers vs. Diversified United 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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