Correlation Between Citigroup and Capgemini

Can any of the company-specific risk be diversified away by investing in both Citigroup and Capgemini 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 Capgemini into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Capgemini SE ADR, you can compare the effects of market volatilities on Citigroup and Capgemini 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 Capgemini. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Capgemini.

Diversification Opportunities for Citigroup and Capgemini

-0.21

Correlation Coefficient

Citigroup  Capgemini

Very good diversification

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

Pair Corralation between Citigroup and Capgemini

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.69 times more return on investment than Capgemini. However, Citigroup is 1.46 times less risky than Capgemini. It trades about -0.22 of its potential returns per unit of risk. Capgemini SE ADR is currently generating about -0.31 per unit of risk. If you would invest  6,424  in Citigroup on March 16, 2024 and sell it today you would lose (401.00) from holding Citigroup or give up 6.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Capgemini SE ADR

Citigroup

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Capgemini SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and Capgemini

The main advantage of trading using opposite Citigroup and Capgemini positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Capgemini 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 Capgemini will offset losses from the drop in Capgemini's long position.

The idea behind Citigroup and Capgemini SE ADR 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.