Correlation Between Citigroup and VitruLtd

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

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

Diversification Opportunities for Citigroup and VitruLtd

0.27

Correlation Coefficient

Citigroup  VitruLtd

Modest diversification

The 3 months correlation between Citigroup and VitruLtd is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VitruLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VitruLtd 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 VitruLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VitruLtd has no effect on the direction of Citigroup i.e., Citigroup and VitruLtd go up and down completely randomly.

Pair Corralation between Citigroup and VitruLtd

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.58 times more return on investment than VitruLtd. However, Citigroup is 1.72 times less risky than VitruLtd. It trades about 0.04 of its potential returns per unit of risk. VitruLtd is currently generating about 0.0 per unit of risk. If you would invest  4,468  in Citigroup on January 19, 2024 and sell it today you would earn a total of  1,388  from holding Citigroup or generate 31.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  VitruLtd

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

VitruLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and VitruLtd

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

The idea behind Citigroup and VitruLtd 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.