Correlation Between Citigroup and Constellation Energy

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

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

Diversification Opportunities for Citigroup and Constellation Energy

-0.47

Correlation Coefficient

Citigroup  Constellation Energy

Very good diversification

The 3 months correlation between Citigroup and Constellation is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Constellation Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation 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 Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy has no effect on the direction of Citigroup i.e., Citigroup and Constellation Energy go up and down completely randomly.

Pair Corralation between Citigroup and Constellation Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.57 times more return on investment than Constellation Energy. However, Citigroup is 1.76 times less risky than Constellation Energy. It trades about 0.15 of its potential returns per unit of risk. Constellation Energy is currently generating about 0.05 per unit of risk. If you would invest  6,292  in Citigroup on October 10, 2024 and sell it today you would earn a total of  1,076  from holding Citigroup or generate 17.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Citigroup  vs.  Constellation Energy

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Constellation Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Constellation Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Constellation Energy

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

The idea behind Citigroup and Constellation 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.

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 .