Correlation Between Citigroup and Dril Quip

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

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

Diversification Opportunities for Citigroup and Dril Quip

-0.64

Correlation Coefficient

Citigroup  Dril Quip

Excellent diversification

The 3 months correlation between Citigroup and Dril is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dril Quip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dril Quip 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 Dril Quip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dril Quip has no effect on the direction of Citigroup i.e., Citigroup and Dril Quip go up and down completely randomly.

Pair Corralation between Citigroup and Dril Quip

If you would invest  6,315  in Citigroup on September 2, 2024 and sell it today you would earn a total of  772.00  from holding Citigroup or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Citigroup  vs.  Dril Quip

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

Dril Quip

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Dril Quip has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unsteady basic indicators, Dril Quip reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Dril Quip

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

The idea behind Citigroup and Dril Quip 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .