Correlation Between Citigroup and SD Standard

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

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

Diversification Opportunities for Citigroup and SD Standard

-0.54

Correlation Coefficient

Citigroup  SD Standard

Excellent diversification

The 3 months correlation between Citigroup and SDSD is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SD Standard Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SD Standard Drilling 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 SD Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SD Standard Drilling has no effect on the direction of Citigroup i.e., Citigroup and SD Standard go up and down completely randomly.

Pair Corralation between Citigroup and SD Standard

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.69 times less return on investment than SD Standard. In addition to that, Citigroup is 2.16 times more volatile than SD Standard Drilling. It trades about 0.03 of its total potential returns per unit of risk. SD Standard Drilling is currently generating about 0.19 per unit of volatility. If you would invest  169.00  in SD Standard Drilling on December 29, 2024 and sell it today you would earn a total of  19.00  from holding SD Standard Drilling or generate 11.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  SD Standard Drilling

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SD Standard Drilling

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SD Standard Drilling are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, SD Standard may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and SD Standard

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

The idea behind Citigroup and SD Standard Drilling 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.