Correlation Between Citigroup and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Citigroup and BP Prudhoe 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 BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and BP Prudhoe Bay, you can compare the effects of market volatilities on Citigroup and BP Prudhoe 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 BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and BP Prudhoe.
Diversification Opportunities for Citigroup and BP Prudhoe
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Citigroup and BMI is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay 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 BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Citigroup i.e., Citigroup and BP Prudhoe go up and down completely randomly.
Pair Corralation between Citigroup and BP Prudhoe
Taking into account the 90-day investment horizon Citigroup is expected to under-perform the BP Prudhoe. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 3.45 times less risky than BP Prudhoe. The stock trades about -0.02 of its potential returns per unit of risk. The BP Prudhoe Bay is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 49.00 in BP Prudhoe Bay on November 27, 2024 and sell it today you would earn a total of 4.00 from holding BP Prudhoe Bay or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Citigroup vs. BP Prudhoe Bay
Performance |
| Timeline |
| Citigroup |
| BP Prudhoe Bay |
Citigroup and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and BP Prudhoe
The main advantage of trading using opposite Citigroup and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, BP Prudhoe 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 BP Prudhoe will offset losses from the drop in BP Prudhoe's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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