Correlation Between Citigroup and Global Partners

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

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

Diversification Opportunities for Citigroup and Global Partners

0.91

Correlation Coefficient

Citigroup  Global Partners

Almost no diversification

The 3 months correlation between Citigroup and Global is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP 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 Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Citigroup i.e., Citigroup and Global Partners go up and down completely randomly.

Pair Corralation between Citigroup and Global Partners

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.15 times more return on investment than Global Partners. However, Citigroup is 7.15 times more volatile than Global Partners LP. It trades about 0.07 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.13 per unit of risk. If you would invest  6,022  in Citigroup on September 22, 2024 and sell it today you would earn a total of  897.00  from holding Citigroup or generate 14.9% return on investment over 90 days.

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

Citigroup  vs.  Global Partners LP

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global Partners LP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Global Partners is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Global Partners

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

The idea behind Citigroup and Global Partners LP 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .