Correlation Between Barclays PLC and Citigroup

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

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

Diversification Opportunities for Barclays PLC and Citigroup

0.72

Correlation Coefficient

Barclays PLC Citigroup

Poor diversification

The 3 months correlation between Barclays and Citigroup is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC ADR and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Barclays PLC 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 Barclays PLC ADR 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 Barclays PLC i.e., Barclays PLC and Citigroup go up and down completely randomly.

Pair Corralation between Barclays PLC and Citigroup

Considering the 90-day investment horizon Barclays PLC ADR is expected to generate 1.16 times more return on investment than Citigroup. However, Barclays PLC is 1.16 times more volatile than Citigroup. It trades about 0.02 of its potential returns per unit of risk. Citigroup is currently generating about -0.05 per unit of risk. If you would invest  761.00  in Barclays PLC ADR on March 4, 2023 and sell it today you would earn a total of  4.00  from holding Barclays PLC ADR or generate 0.53% return on investment over 90 days.

Barclays PLC ADR  vs.  Citigroup

Barclays PLC ADR

Barclays Performance

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Over the last 90 days Barclays PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Citigroup

Citigroup Performance

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Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in July 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Barclays PLC and Citigroup

The main advantage of trading using opposite Barclays PLC and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC 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 Barclays PLC ADR 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.