Correlation Between Citigroup and Valeura Energy

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

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

Diversification Opportunities for Citigroup and Valeura Energy

0.45

Correlation Coefficient

Citigroup  Valeura Energy

Very weak diversification

The 3 months correlation between Citigroup and Valeura is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Valeura Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeura 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 Valeura Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeura Energy has no effect on the direction of Citigroup i.e., Citigroup and Valeura Energy go up and down completely randomly.

Pair Corralation between Citigroup and Valeura Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.91 times less return on investment than Valeura Energy. But when comparing it to its historical volatility, Citigroup is 1.55 times less risky than Valeura Energy. It trades about 0.03 of its potential returns per unit of risk. Valeura Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  476.00  in Valeura Energy on December 29, 2024 and sell it today you would earn a total of  108.00  from holding Valeura Energy or generate 22.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Valeura Energy

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.

Valeura Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valeura Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Valeura Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Valeura Energy

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

The idea behind Citigroup and Valeura 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.