Correlation Between Citigroup and E3 LITHIUM

Can any of the company-specific risk be diversified away by investing in both Citigroup and E3 LITHIUM 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 E3 LITHIUM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and E3 LITHIUM LTD, you can compare the effects of market volatilities on Citigroup and E3 LITHIUM 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 E3 LITHIUM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and E3 LITHIUM.

Diversification Opportunities for Citigroup and E3 LITHIUM

-0.58

Correlation Coefficient

Citigroup  E3 LITHIUM

Excellent diversification

The 3 months correlation between Citigroup and OW3 is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and E3 LITHIUM LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E3 LITHIUM LTD 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 E3 LITHIUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E3 LITHIUM LTD has no effect on the direction of Citigroup i.e., Citigroup and E3 LITHIUM go up and down completely randomly.

Pair Corralation between Citigroup and E3 LITHIUM

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.37 times more return on investment than E3 LITHIUM. However, Citigroup is 2.73 times less risky than E3 LITHIUM. It trades about 0.07 of its potential returns per unit of risk. E3 LITHIUM LTD is currently generating about -0.03 per unit of risk. If you would invest  5,549  in Citigroup on December 5, 2024 and sell it today you would earn a total of  1,686  from holding Citigroup or generate 30.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.4%
Values	Daily Returns

Citigroup  vs.  E3 LITHIUM LTD

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

E3 LITHIUM LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days E3 LITHIUM LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and E3 LITHIUM

The main advantage of trading using opposite Citigroup and E3 LITHIUM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, E3 LITHIUM 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 E3 LITHIUM will offset losses from the drop in E3 LITHIUM's long position.

The idea behind Citigroup and E3 LITHIUM LTD 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.