Correlation Between Citigroup and STEP Energy
Can any of the company-specific risk be diversified away by investing in both Citigroup and STEP 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 STEP Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and STEP Energy Services, you can compare the effects of market volatilities on Citigroup and STEP 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 STEP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and STEP Energy.
Diversification Opportunities for Citigroup and STEP Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and STEP is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services 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 STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of Citigroup i.e., Citigroup and STEP Energy go up and down completely randomly.
Pair Corralation between Citigroup and STEP Energy
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.46 times more return on investment than STEP Energy. However, Citigroup is 2.19 times less risky than STEP Energy. It trades about 0.07 of its potential returns per unit of risk. STEP Energy Services is currently generating about 0.02 per unit of risk. If you would invest 4,218 in Citigroup on September 2, 2024 and sell it today you would earn a total of 2,869 from holding Citigroup or generate 68.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Citigroup vs. STEP Energy Services
Performance |
| Timeline |
| Citigroup |
| STEP Energy Services |
Citigroup and STEP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and STEP Energy
The main advantage of trading using opposite Citigroup and STEP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, STEP 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 STEP Energy will offset losses from the drop in STEP Energy's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| STEP Energy vs. Total Energy Services | STEP Energy vs. Trican Well Service | STEP Energy vs. Koil Energy Solutions | STEP Energy vs. TerraVest Industries |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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