Correlation Between Visa and CITIGROUP

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Can any of the company-specific risk be diversified away by investing in both Visa and CITIGROUP 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 Visa and CITIGROUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and CITIGROUP INC 6675, you can compare the effects of market volatilities on Visa and CITIGROUP 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 Visa with a short position of CITIGROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and CITIGROUP.

Diversification Opportunities for Visa and CITIGROUP

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Visa and CITIGROUP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and CITIGROUP INC 6675 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP INC 6675 and Visa 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 Visa Class A are associated (or correlated) with CITIGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIGROUP INC 6675 has no effect on the direction of Visa i.e., Visa and CITIGROUP go up and down completely randomly.

Pair Corralation between Visa and CITIGROUP

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.2 times more return on investment than CITIGROUP. However, Visa is 1.2 times more volatile than CITIGROUP INC 6675. It trades about 0.08 of its potential returns per unit of risk. CITIGROUP INC 6675 is currently generating about 0.01 per unit of risk. If you would invest  27,727  in Visa Class A on November 3, 2024 and sell it today you would earn a total of  6,453  from holding Visa Class A or generate 23.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy87.9%
ValuesDaily Returns

Visa Class A  vs.  CITIGROUP INC 6675

 Performance 
       Timeline  
Visa Class A 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.
CITIGROUP INC 6675 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CITIGROUP INC 6675 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Visa and CITIGROUP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Visa and CITIGROUP

The main advantage of trading using opposite Visa and CITIGROUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, CITIGROUP 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 CITIGROUP will offset losses from the drop in CITIGROUP's long position.
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The idea behind Visa Class A and CITIGROUP INC 6675 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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