Correlation Between Citigroup and Swatch Group

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

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

Diversification Opportunities for Citigroup and Swatch Group

0.73

Correlation Coefficient

Citigroup  Swatch Group

Poor diversification

The 3 months correlation between Citigroup and Swatch is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Swatch Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group AG 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 Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group AG has no effect on the direction of Citigroup i.e., Citigroup and Swatch Group go up and down completely randomly.

Pair Corralation between Citigroup and Swatch Group

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.17 times more return on investment than Swatch Group. However, Citigroup is 1.17 times more volatile than Swatch Group AG. It trades about 0.48 of its potential returns per unit of risk. Swatch Group AG is currently generating about 0.26 per unit of risk. If you would invest  6,272  in Citigroup on February 13, 2025 and sell it today you would earn a total of  1,285  from holding Citigroup or generate 20.49% return on investment over 90 days.

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

Citigroup  vs.  Swatch Group AG

Citigroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Swatch Group AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swatch Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Swatch Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Swatch Group

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

The idea behind Citigroup and Swatch Group AG 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.