Correlation Between Citigroup and New Stratus
Can any of the company-specific risk be diversified away by investing in both Citigroup and New Stratus 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 New Stratus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and New Stratus Energy, you can compare the effects of market volatilities on Citigroup and New Stratus 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 New Stratus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and New Stratus.
Diversification Opportunities for Citigroup and New Stratus
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and New is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and New Stratus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Stratus Energy 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 New Stratus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Stratus Energy has no effect on the direction of Citigroup i.e., Citigroup and New Stratus go up and down completely randomly.
Pair Corralation between Citigroup and New Stratus
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.36 times more return on investment than New Stratus. However, Citigroup is 2.8 times less risky than New Stratus. It trades about 0.13 of its potential returns per unit of risk. New Stratus Energy is currently generating about 0.03 per unit of risk. If you would invest 4,053 in Citigroup on September 1, 2024 and sell it today you would earn a total of 3,034 from holding Citigroup or generate 74.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.26% |
| Values | Daily Returns |
Citigroup vs. New Stratus Energy
Performance |
| Timeline |
| Citigroup |
| New Stratus Energy |
Citigroup and New Stratus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and New Stratus
The main advantage of trading using opposite Citigroup and New Stratus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, New Stratus 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 New Stratus will offset losses from the drop in New Stratus' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| New Stratus vs. Arrow Exploration Corp | New Stratus vs. Southern Energy Corp | New Stratus vs. TAG Oil | New Stratus vs. Hemisphere Energy |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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