Correlation Between Citigroup and DXP Enterprises

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

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

Diversification Opportunities for Citigroup and DXP Enterprises

0.88

Correlation Coefficient

Citigroup  DXP Enterprises

Very poor diversification

The 3 months correlation between Citigroup and DXP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DXP Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXP Enterprises 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 DXP Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXP Enterprises has no effect on the direction of Citigroup i.e., Citigroup and DXP Enterprises go up and down completely randomly.

Pair Corralation between Citigroup and DXP Enterprises

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.15 times less return on investment than DXP Enterprises. But when comparing it to its historical volatility, Citigroup is 1.71 times less risky than DXP Enterprises. It trades about 0.03 of its potential returns per unit of risk. DXP Enterprises is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  8,208  in DXP Enterprises on December 28, 2024 and sell it today you would earn a total of  85.00  from holding DXP Enterprises or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  DXP Enterprises

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

DXP Enterprises

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, DXP Enterprises is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and DXP Enterprises

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

The idea behind Citigroup and DXP Enterprises 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.