Correlation Between Citigroup and OReilly Automotive

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

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

Diversification Opportunities for Citigroup and OReilly Automotive

0.91

Correlation Coefficient

Citigroup  OReilly Automotive

Almost no diversification

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

Pair Corralation between Citigroup and OReilly Automotive

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the OReilly Automotive. In addition to that, Citigroup is 1.09 times more volatile than OReilly Automotive. It trades about -0.03 of its total potential returns per unit of risk. OReilly Automotive is currently generating about 0.04 per unit of volatility. If you would invest  114,950  in OReilly Automotive on September 23, 2024 and sell it today you would earn a total of  1,050  from holding OReilly Automotive or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  OReilly Automotive

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 unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

OReilly Automotive

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OReilly Automotive are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, OReilly Automotive reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and OReilly Automotive

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

The idea behind Citigroup and OReilly Automotive 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.