Correlation Between Citigroup and BW Offshore

Can any of the company-specific risk be diversified away by investing in both Citigroup and BW Offshore 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 BW Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and BW Offshore, you can compare the effects of market volatilities on Citigroup and BW Offshore 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 BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and BW Offshore.

Diversification Opportunities for Citigroup and BW Offshore

0.47

Correlation Coefficient

Citigroup  BW Offshore

Very weak diversification

The 3 months correlation between Citigroup and 0RKH is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BW Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore 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 BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore has no effect on the direction of Citigroup i.e., Citigroup and BW Offshore go up and down completely randomly.

Pair Corralation between Citigroup and BW Offshore

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.77 times less return on investment than BW Offshore. But when comparing it to its historical volatility, Citigroup is 1.3 times less risky than BW Offshore. It trades about 0.03 of its potential returns per unit of risk. BW Offshore is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,832  in BW Offshore on December 29, 2024 and sell it today you would earn a total of  151.00  from holding BW Offshore or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Citigroup  vs.  BW Offshore

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BW Offshore

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW Offshore are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BW Offshore may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and BW Offshore

The main advantage of trading using opposite Citigroup and BW Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, BW Offshore 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 BW Offshore will offset losses from the drop in BW Offshore's long position.

The idea behind Citigroup and BW Offshore pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.