Correlation Between Citigroup and Eternal Energy

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

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

Diversification Opportunities for Citigroup and Eternal Energy

0.52

Correlation Coefficient

Citigroup  Eternal Energy

Very weak diversification

The 3 months correlation between Citigroup and Eternal is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Eternal Energy Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternal Energy 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 Eternal Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternal Energy Public has no effect on the direction of Citigroup i.e., Citigroup and Eternal Energy go up and down completely randomly.

Pair Corralation between Citigroup and Eternal Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 25.87 times less return on investment than Eternal Energy. But when comparing it to its historical volatility, Citigroup is 39.73 times less risky than Eternal Energy. It trades about 0.1 of its potential returns per unit of risk. Eternal Energy Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Eternal Energy Public on September 17, 2024 and sell it today you would earn a total of  30.00  from holding Eternal Energy Public or generate 107.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.76%
Values	Daily Returns

Citigroup  vs.  Eternal Energy Public

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.

Eternal Energy Public

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eternal Energy Public are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Eternal Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Eternal Energy

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

The idea behind Citigroup and Eternal Energy 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.