Correlation Between Citigroup and Carbon Revolution

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

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

Diversification Opportunities for Citigroup and Carbon Revolution

-0.09

Correlation Coefficient

Citigroup  Carbon Revolution

Good diversification

The 3 months correlation between Citigroup and Carbon is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public 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 Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of Citigroup i.e., Citigroup and Carbon Revolution go up and down completely randomly.

Pair Corralation between Citigroup and Carbon Revolution

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.26 times less return on investment than Carbon Revolution. But when comparing it to its historical volatility, Citigroup is 8.81 times less risky than Carbon Revolution. It trades about 0.1 of its potential returns per unit of risk. Carbon Revolution Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Carbon Revolution Public on September 22, 2024 and sell it today you would lose (0.22) from holding Carbon Revolution Public or give up 7.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

Citigroup  vs.  Carbon Revolution Public

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Carbon Revolution Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Carbon Revolution

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

The idea behind Citigroup and Carbon Revolution Public 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.