Correlation Between Citigroup and Charwood Energy

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

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

Diversification Opportunities for Citigroup and Charwood Energy

0.38

Correlation Coefficient

Citigroup  Charwood Energy

Weak diversification

The 3 months correlation between Citigroup and Charwood is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Charwood Energy SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charwood Energy SA 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 Charwood Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charwood Energy SA has no effect on the direction of Citigroup i.e., Citigroup and Charwood Energy go up and down completely randomly.

Pair Corralation between Citigroup and Charwood Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.77 times less return on investment than Charwood Energy. But when comparing it to its historical volatility, Citigroup is 3.69 times less risky than Charwood Energy. It trades about 0.04 of its potential returns per unit of risk. Charwood Energy SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  254.00  in Charwood Energy SA on December 21, 2024 and sell it today you would earn a total of  90.00  from holding Charwood Energy SA or generate 35.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Citigroup  vs.  Charwood Energy SA

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Charwood Energy SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charwood Energy SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Charwood Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Charwood Energy

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

The idea behind Citigroup and Charwood Energy SA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.