Correlation Between Citigroup and Materials Petroleum

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

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

Diversification Opportunities for Citigroup and Materials Petroleum

0.12

Correlation Coefficient

Citigroup  Materials Petroleum

Average diversification

The 3 months correlation between Citigroup and Materials is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC 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 Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Citigroup i.e., Citigroup and Materials Petroleum go up and down completely randomly.

Pair Corralation between Citigroup and Materials Petroleum

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.56 times more return on investment than Materials Petroleum. However, Citigroup is 1.78 times less risky than Materials Petroleum. It trades about -0.09 of its potential returns per unit of risk. Materials Petroleum JSC is currently generating about -0.21 per unit of risk. If you would invest  7,075  in Citigroup on September 25, 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	Insignificant
Accuracy	65.0%
Values	Daily Returns

Citigroup  vs.  Materials Petroleum JSC

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Materials Petroleum JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Petroleum JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Materials Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Materials Petroleum

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

The idea behind Citigroup and Materials Petroleum JSC 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.