Correlation Between Citigroup and Equinor ASA

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

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

Diversification Opportunities for Citigroup and Equinor ASA

-0.44

Correlation Coefficient

Citigroup  Equinor ASA

Very good diversification

The 3 months correlation between Citigroup and Equinor is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Equinor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA ADR 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA ADR has no effect on the direction of Citigroup i.e., Citigroup and Equinor ASA go up and down completely randomly.

Pair Corralation between Citigroup and Equinor ASA

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.94 times more return on investment than Equinor ASA. However, Citigroup is 1.06 times less risky than Equinor ASA. It trades about 0.2 of its potential returns per unit of risk. Equinor ASA ADR is currently generating about -0.01 per unit of risk. If you would invest  6,412  in Citigroup on August 30, 2024 and sell it today you would earn a total of  604.00  from holding Citigroup or generate 9.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Equinor ASA ADR

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Equinor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equinor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Citigroup and Equinor ASA

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

The idea behind Citigroup and Equinor ASA ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.