Correlation Between Citigroup and Vista Oil

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

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

Diversification Opportunities for Citigroup and Vista Oil

0.8

Correlation Coefficient

Citigroup  Vista Oil

Very poor diversification

The 3 months correlation between Citigroup and Vista is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vista Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Oil Gas 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 Vista Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Oil Gas has no effect on the direction of Citigroup i.e., Citigroup and Vista Oil go up and down completely randomly.

Pair Corralation between Citigroup and Vista Oil

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.13 times less return on investment than Vista Oil. But when comparing it to its historical volatility, Citigroup is 1.82 times less risky than Vista Oil. It trades about 0.15 of its potential returns per unit of risk. Vista Oil Gas is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  93,928  in Vista Oil Gas on September 16, 2024 and sell it today you would earn a total of  23,040  from holding Vista Oil Gas or generate 24.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.67%
Values	Daily Returns

Citigroup  vs.  Vista Oil Gas

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.

Vista Oil Gas

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vista Oil Gas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vista Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Vista Oil

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

The idea behind Citigroup and Vista Oil Gas 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.