Correlation Between Associated British and Citigroup
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Citigroup, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Citigroup.
Diversification Opportunities for Associated British and Citigroup
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Associated and Citigroup is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Associated British 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 Associated British Foods 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 has no effect on the direction of Associated British i.e., Associated British and Citigroup go up and down completely randomly.
Pair Corralation between Associated British and Citigroup
Assuming the 90 days horizon Associated British is expected to generate 1.48 times less return on investment than Citigroup. In addition to that, Associated British is 1.46 times more volatile than Citigroup. It trades about 0.26 of its total potential returns per unit of risk. Citigroup is currently generating about 0.56 per unit of volatility. If you would invest 5,571 in Citigroup on December 29, 2023 and sell it today you would earn a total of 704.00 from holding Citigroup or generate 12.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.65% |
Values | Daily Returns |
Associated British Foods vs. Citigroup
Performance |
Timeline |
Associated British Foods |
Citigroup |
Associated British and Citigroup Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Associated British and Citigroup
The main advantage of trading using opposite Associated British and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.Associated British vs. Kraft Heinz Co | Associated British vs. General Mills | Associated British vs. Danone PK | Associated British vs. McCormick Company Incorporated |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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