Correlation Between Citigroup and EnQuest PLC

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

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

Diversification Opportunities for Citigroup and EnQuest PLC

0.35

Correlation Coefficient

Citigroup  EnQuest PLC

Weak diversification

The 3 months correlation between Citigroup and EnQuest is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and EnQuest PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnQuest PLC 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 EnQuest PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnQuest PLC has no effect on the direction of Citigroup i.e., Citigroup and EnQuest PLC go up and down completely randomly.

Pair Corralation between Citigroup and EnQuest PLC

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.28 times less return on investment than EnQuest PLC. But when comparing it to its historical volatility, Citigroup is 3.13 times less risky than EnQuest PLC. It trades about 0.21 of its potential returns per unit of risk. EnQuest PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  14.00  in EnQuest PLC on December 2, 2024 and sell it today you would earn a total of  2.00  from holding EnQuest PLC or generate 14.29% return on investment over 90 days.

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

Citigroup  vs.  EnQuest PLC

Citigroup

Risk-Adjusted Performance

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.

EnQuest PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EnQuest PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EnQuest PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and EnQuest PLC

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

The idea behind Citigroup and EnQuest PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.