Correlation Between Citigroup and TotalEnergies

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

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

Diversification Opportunities for Citigroup and TotalEnergies

0.65

Correlation Coefficient

Citigroup  TotalEnergies

Poor diversification

The 3 months correlation between Citigroup and TotalEnergies is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and TotalEnergies EP Gabon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies EP Gabon 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies EP Gabon has no effect on the direction of Citigroup i.e., Citigroup and TotalEnergies go up and down completely randomly.

Pair Corralation between Citigroup and TotalEnergies

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.96 times more return on investment than TotalEnergies. However, Citigroup is 1.04 times less risky than TotalEnergies. It trades about 0.1 of its potential returns per unit of risk. TotalEnergies EP Gabon is currently generating about 0.08 per unit of risk. If you would invest  4,903  in Citigroup on September 17, 2024 and sell it today you would earn a total of  2,198  from holding Citigroup or generate 44.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.8%
Values	Daily Returns

Citigroup  vs.  TotalEnergies EP Gabon

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

TotalEnergies EP Gabon

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies EP Gabon are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TotalEnergies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and TotalEnergies

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

The idea behind Citigroup and TotalEnergies EP Gabon 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.