Correlation Between Citigroup and Brompton Energy

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

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

Diversification Opportunities for Citigroup and Brompton Energy

0.85

Correlation Coefficient

Citigroup  Brompton Energy

Very poor diversification

The 3 months correlation between Citigroup and Brompton is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Brompton Energy Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brompton Energy Split 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 Brompton Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brompton Energy Split has no effect on the direction of Citigroup i.e., Citigroup and Brompton Energy go up and down completely randomly.

Pair Corralation between Citigroup and Brompton Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.7 times less return on investment than Brompton Energy. But when comparing it to its historical volatility, Citigroup is 2.1 times less risky than Brompton Energy. It trades about 0.08 of its potential returns per unit of risk. Brompton Energy Split is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  270.00  in Brompton Energy Split on October 2, 2024 and sell it today you would earn a total of  276.00  from holding Brompton Energy Split or generate 102.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.13%
Values	Daily Returns

Citigroup  vs.  Brompton Energy Split

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Brompton Energy Split

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brompton Energy Split are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brompton Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Brompton Energy

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

The idea behind Citigroup and Brompton Energy Split 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.