Correlation Between Citigroup and Marathon Petroleum

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

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

Diversification Opportunities for Citigroup and Marathon Petroleum

-0.21

Correlation Coefficient

Citigroup  Marathon Petroleum

Very good diversification

The 3 months correlation between Citigroup and Marathon is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Marathon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum 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 Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum has no effect on the direction of Citigroup i.e., Citigroup and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Citigroup and Marathon Petroleum

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.46 times more return on investment than Marathon Petroleum. However, Citigroup is 1.46 times more volatile than Marathon Petroleum. It trades about 0.14 of its potential returns per unit of risk. Marathon Petroleum is currently generating about -0.11 per unit of risk. If you would invest  6,127  in Citigroup on October 1, 2024 and sell it today you would earn a total of  973.00  from holding Citigroup or generate 15.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Marathon Petroleum

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.

Marathon Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marathon Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the 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 Marathon Petroleum

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

The idea behind Citigroup and Marathon Petroleum 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.