Correlation Between Citigroup and KINDER

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

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

Diversification Opportunities for Citigroup and KINDER

-0.64

Correlation Coefficient

Citigroup  KINDER

Excellent diversification

The 3 months correlation between Citigroup and KINDER is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Citigroup i.e., Citigroup and KINDER go up and down completely randomly.

Pair Corralation between Citigroup and KINDER

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.08 times more return on investment than KINDER. However, Citigroup is 1.08 times more volatile than KINDER MORGAN ENERGY. It trades about -0.03 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.1 per unit of risk. If you would invest  6,984  in Citigroup on September 23, 2024 and sell it today you would lose (65.00) from holding Citigroup or give up 0.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Citigroup  vs.  KINDER MORGAN ENERGY

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN ENERGY investors.

Pair Trading with Citigroup and KINDER

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

The idea behind Citigroup and KINDER MORGAN ENERGY 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.