Correlation Between CITIGROUP and Ecolab

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Can any of the company-specific risk be diversified away by investing in both CITIGROUP and Ecolab 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 Ecolab into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITIGROUP INC 33 and Ecolab Inc, you can compare the effects of market volatilities on CITIGROUP and Ecolab 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 Ecolab. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIGROUP and Ecolab.

Diversification Opportunities for CITIGROUP and Ecolab

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between CITIGROUP and Ecolab is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CITIGROUP INC 33 and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 INC 33 are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of CITIGROUP i.e., CITIGROUP and Ecolab go up and down completely randomly.

Pair Corralation between CITIGROUP and Ecolab

Assuming the 90 days trading horizon CITIGROUP INC 33 is expected to under-perform the Ecolab. But the bond apears to be less risky and, when comparing its historical volatility, CITIGROUP INC 33 is 1.26 times less risky than Ecolab. The bond trades about -0.22 of its potential returns per unit of risk. The Ecolab Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  24,450  in Ecolab Inc on September 3, 2024 and sell it today you would earn a total of  427.00  from holding Ecolab Inc or generate 1.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

CITIGROUP INC 33  vs.  Ecolab Inc

 Performance 
       Timeline  
CITIGROUP INC 33 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CITIGROUP INC 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITIGROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Ecolab Inc 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Ecolab is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

CITIGROUP and Ecolab Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CITIGROUP and Ecolab

The main advantage of trading using opposite CITIGROUP and Ecolab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIGROUP position performs unexpectedly, Ecolab 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 Ecolab will offset losses from the drop in Ecolab's long position.
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The idea behind CITIGROUP INC 33 and Ecolab Inc 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.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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