Correlation Between Associated British and Citigroup

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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 Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Associated British Foods  vs.  Citigroup

 Performance 
       Timeline  
Associated British Foods 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Associated British is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Citigroup 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.
The idea behind Associated British Foods and Citigroup 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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