Correlation Between Citigroup and Peninsula Energy

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

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

Diversification Opportunities for Citigroup and Peninsula Energy

-0.69

Correlation Coefficient

Citigroup  Peninsula Energy

Excellent diversification

The 3 months correlation between Citigroup and Peninsula is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Peninsula Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy 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 Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Citigroup i.e., Citigroup and Peninsula Energy go up and down completely randomly.

Pair Corralation between Citigroup and Peninsula Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.25 times more return on investment than Peninsula Energy. However, Citigroup is 4.01 times less risky than Peninsula Energy. It trades about 0.09 of its potential returns per unit of risk. Peninsula Energy Limited is currently generating about -0.01 per unit of risk. If you would invest  5,896  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,205  from holding Citigroup or generate 20.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Citigroup  vs.  Peninsula Energy Limited

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Peninsula Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and Peninsula Energy

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

The idea behind Citigroup and Peninsula Energy Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.