Correlation Between Citigroup and Altern Energy

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

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

Diversification Opportunities for Citigroup and Altern Energy

0.41

Correlation Coefficient

Citigroup  Altern Energy

Very weak diversification

The 3 months correlation between Citigroup and Altern is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Altern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altern Energy 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 Altern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altern Energy has no effect on the direction of Citigroup i.e., Citigroup and Altern Energy go up and down completely randomly.

Pair Corralation between Citigroup and Altern Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.23 times less return on investment than Altern Energy. But when comparing it to its historical volatility, Citigroup is 1.45 times less risky than Altern Energy. It trades about 0.13 of its potential returns per unit of risk. Altern Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,278  in Altern Energy on October 8, 2024 and sell it today you would earn a total of  1,113  from holding Altern Energy or generate 87.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.26%
Values	Daily Returns

Citigroup  vs.  Altern Energy

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Altern Energy

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Altern Energy are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Altern Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Altern Energy

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

The idea behind Citigroup and Altern Energy 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..