Correlation Between Vestas Wind and Citigroup
Can any of the company-specific risk be diversified away by investing in both Vestas Wind 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 Vestas Wind and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Citigroup, you can compare the effects of market volatilities on Vestas Wind 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 Vestas Wind with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Citigroup.
Diversification Opportunities for Vestas Wind and Citigroup
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vestas and Citigroup is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Vestas Wind 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 Vestas Wind Systems 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 Vestas Wind i.e., Vestas Wind and Citigroup go up and down completely randomly.
Pair Corralation between Vestas Wind and Citigroup
Assuming the 90 days trading horizon Vestas Wind Systems is expected to under-perform the Citigroup. In addition to that, Vestas Wind is 1.33 times more volatile than Citigroup. It trades about -0.05 of its total potential returns per unit of risk. Citigroup is currently generating about 0.06 per unit of volatility. If you would invest 5,542 in Citigroup on January 18, 2024 and sell it today you would earn a total of 160.00 from holding Citigroup or generate 2.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
Vestas Wind Systems vs. Citigroup
Performance |
| Timeline |
| Vestas Wind Systems |
| Citigroup |
Vestas Wind and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Citigroup
The main advantage of trading using opposite Vestas Wind and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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 Vestas Wind Systems 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.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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