Correlation Between Citigroup and CONSOL Energy

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

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

Diversification Opportunities for Citigroup and CONSOL Energy

0.87

Correlation Coefficient

Citigroup  CONSOL Energy

Very poor diversification

The 3 months correlation between Citigroup and CONSOL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CONSOL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOL 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 CONSOL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOL Energy has no effect on the direction of Citigroup i.e., Citigroup and CONSOL Energy go up and down completely randomly.

Pair Corralation between Citigroup and CONSOL Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.73 times more return on investment than CONSOL Energy. However, Citigroup is 1.37 times less risky than CONSOL Energy. It trades about -0.09 of its potential returns per unit of risk. CONSOL Energy is currently generating about -0.57 per unit of risk. If you would invest  7,075  in Citigroup on September 24, 2024 and sell it today you would lose (156.00) from holding Citigroup or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  CONSOL 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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

CONSOL Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CONSOL Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CONSOL Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and CONSOL Energy

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

The idea behind Citigroup and CONSOL 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.