Correlation Between Citigroup and Power Line

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

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

Diversification Opportunities for Citigroup and Power Line

-0.57

Correlation Coefficient

Citigroup  Power Line

Excellent diversification

The 3 months correlation between Citigroup and Power is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Power Line Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Line Engineering 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 Power Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Line Engineering has no effect on the direction of Citigroup i.e., Citigroup and Power Line go up and down completely randomly.

Pair Corralation between Citigroup and Power Line

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.02 times more return on investment than Power Line. However, Citigroup is 1.02 times more volatile than Power Line Engineering. It trades about 0.19 of its potential returns per unit of risk. Power Line Engineering is currently generating about -0.09 per unit of risk. If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,408  from holding Citigroup or generate 24.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Power Line Engineering

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Power Line Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Line Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Citigroup and Power Line

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

The idea behind Citigroup and Power Line Engineering 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.