Correlation Between Citigroup and Hexcel Corp

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Hexcel Corp 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 Hexcel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Hexcel Corp, you can compare the effects of market volatilities on Citigroup and Hexcel Corp 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 Hexcel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Hexcel Corp.

Diversification Opportunities for Citigroup and Hexcel Corp

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Citigroup and Hexcel is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hexcel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel Corp 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 Hexcel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel Corp has no effect on the direction of Citigroup i.e., Citigroup and Hexcel Corp go up and down completely randomly.

Pair Corralation between Citigroup and Hexcel Corp

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.99 times less return on investment than Hexcel Corp. But when comparing it to its historical volatility, Citigroup is 1.36 times less risky than Hexcel Corp. It trades about 0.01 of its potential returns per unit of risk. Hexcel Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,738  in Hexcel Corp on July 2, 2022 and sell it today you would earn a total of  1,452  from holding Hexcel Corp or generate 38.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Hexcel Corp

 Performance (%) 
       Timeline  
Citigroup 
Citigroup Performance
0 of 100
Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Citigroup Price Channel

Hexcel Corp 
Hexcel Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Hexcel Corp is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Hexcel Price Channel

Citigroup and Hexcel Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Hexcel Corp

The main advantage of trading using opposite Citigroup and Hexcel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Hexcel Corp 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 Hexcel Corp will offset losses from the drop in Hexcel Corp's long position.
Citigroup vs. Amazon Inc
The idea behind Citigroup and Hexcel Corp 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.
Hexcel Corp vs. Amazon Inc
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 Piotroski F Score module to get Piotroski F Score based on binary analysis strategy of nine different fundamentals.

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