Correlation Between Citigroup and Paz Oil
Can any of the company-specific risk be diversified away by investing in both Citigroup and Paz Oil 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 Paz Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Paz Oil, you can compare the effects of market volatilities on Citigroup and Paz Oil 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 Paz Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Paz Oil.
Diversification Opportunities for Citigroup and Paz Oil
Very poor diversification
The 3 months correlation between Citigroup and Paz is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Paz Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paz Oil 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 Paz Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paz Oil has no effect on the direction of Citigroup i.e., Citigroup and Paz Oil go up and down completely randomly.
Pair Corralation between Citigroup and Paz Oil
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.04 times less return on investment than Paz Oil. In addition to that, Citigroup is 1.02 times more volatile than Paz Oil. It trades about 0.08 of its total potential returns per unit of risk. Paz Oil is currently generating about 0.16 per unit of volatility. If you would invest 3,292,627 in Paz Oil on September 2, 2024 and sell it today you would earn a total of 1,047,373 from holding Paz Oil or generate 31.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 75.4% |
| Values | Daily Returns |
Citigroup vs. Paz Oil
Performance |
| Timeline |
| Citigroup |
| Paz Oil |
Citigroup and Paz Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Paz Oil
The main advantage of trading using opposite Citigroup and Paz Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Paz Oil 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 Paz Oil will offset losses from the drop in Paz Oil'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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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