Correlation Between Citigroup and Eos Energy

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

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

Diversification Opportunities for Citigroup and Eos Energy

-0.56

Correlation Coefficient

Citigroup  Eos Energy

Excellent diversification

The 3 months correlation between Citigroup and Eos is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Eos Energy Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eos Energy 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 Eos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eos Energy Enterprises has no effect on the direction of Citigroup i.e., Citigroup and Eos Energy go up and down completely randomly.

Pair Corralation between Citigroup and Eos Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.34 times less return on investment than Eos Energy. But when comparing it to its historical volatility, Citigroup is 7.61 times less risky than Eos Energy. It trades about 0.08 of its potential returns per unit of risk. Eos Energy Enterprises is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  79.00  in Eos Energy Enterprises on September 1, 2024 and sell it today you would lose (61.00) from holding Eos Energy Enterprises or give up 77.22% of portfolio value over 90 days.

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

Citigroup  vs.  Eos Energy Enterprises

Citigroup

Risk-Adjusted Performance

10 of 100

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.

Eos Energy Enterprises

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eos Energy Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Eos Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Eos Energy

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

The idea behind Citigroup and Eos Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.