Correlation Between Citigroup and GAMCO Natural

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

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

Diversification Opportunities for Citigroup and GAMCO Natural

-0.82

Correlation Coefficient

Citigroup  GAMCO Natural

Pay attention - limited upside

The 3 months correlation between Citigroup and GAMCO is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and GAMCO Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMCO Natural Resources 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 GAMCO Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMCO Natural Resources has no effect on the direction of Citigroup i.e., Citigroup and GAMCO Natural go up and down completely randomly.

Pair Corralation between Citigroup and GAMCO Natural

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.51 times more return on investment than GAMCO Natural. However, Citigroup is 3.51 times more volatile than GAMCO Natural Resources. It trades about 0.14 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about -0.31 per unit of risk. If you would invest  6,077  in Citigroup on October 3, 2024 and sell it today you would earn a total of  962.00  from holding Citigroup or generate 15.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  GAMCO Natural Resources

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 unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and GAMCO Natural

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

The idea behind Citigroup and GAMCO Natural Resources 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.