Correlation Between Citigroup and Petra Diamonds

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

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

Diversification Opportunities for Citigroup and Petra Diamonds

-0.35

Correlation Coefficient

Citigroup  Petra Diamonds

Very good diversification

The 3 months correlation between Citigroup and Petra is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Petra Diamonds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petra Diamonds 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 Petra Diamonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petra Diamonds has no effect on the direction of Citigroup i.e., Citigroup and Petra Diamonds go up and down completely randomly.

Pair Corralation between Citigroup and Petra Diamonds

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.73 times more return on investment than Petra Diamonds. However, Citigroup is 1.38 times less risky than Petra Diamonds. It trades about 0.02 of its potential returns per unit of risk. Petra Diamonds Limited is currently generating about -0.04 per unit of risk. If you would invest  7,173  in Citigroup on December 5, 2024 and sell it today you would earn a total of  62.00  from holding Citigroup or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Citigroup  vs.  Petra Diamonds Limited

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.

Petra Diamonds

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petra Diamonds Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and Petra Diamonds

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

The idea behind Citigroup and Petra Diamonds 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.