Correlation Between Citigroup and Prime Energy
Can any of the company-specific risk be diversified away by investing in both Citigroup and Prime Energy 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 Prime Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Prime Energy PE, you can compare the effects of market volatilities on Citigroup and Prime Energy 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 Prime Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Prime Energy.
Diversification Opportunities for Citigroup and Prime Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Prime is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Prime Energy PE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Energy PE 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 Prime Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Energy PE has no effect on the direction of Citigroup i.e., Citigroup and Prime Energy go up and down completely randomly.
Pair Corralation between Citigroup and Prime Energy
Taking into account the 90-day investment horizon Citigroup is expected to generate 5.24 times less return on investment than Prime Energy. But when comparing it to its historical volatility, Citigroup is 2.94 times less risky than Prime Energy. It trades about 0.09 of its potential returns per unit of risk. Prime Energy PE is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 26,450 in Prime Energy PE on September 1, 2024 and sell it today you would earn a total of 42,250 from holding Prime Energy PE or generate 159.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 75.53% |
| Values | Daily Returns |
Citigroup vs. Prime Energy PE
Performance |
| Timeline |
| Citigroup |
| Prime Energy PE |
Citigroup and Prime Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Prime Energy
The main advantage of trading using opposite Citigroup and Prime Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Prime Energy 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 Prime Energy will offset losses from the drop in Prime Energy's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Prime Energy vs. Energix Renewable Energies | Prime Energy vs. Meshek Energy Renewable Energies | Prime Energy vs. Doral Group Renewable | Prime Energy vs. Homebiogas |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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