Correlation Between Citigroup and Williams Companies

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

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

Diversification Opportunities for Citigroup and Williams Companies

0.26

Correlation Coefficient

Citigroup  Williams Companies

Modest diversification

The 3 months correlation between Citigroup and Williams is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Williams Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Companies 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 Williams Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Companies has no effect on the direction of Citigroup i.e., Citigroup and Williams Companies go up and down completely randomly.

Pair Corralation between Citigroup and Williams Companies

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.89 times less return on investment than Williams Companies. In addition to that, Citigroup is 1.01 times more volatile than Williams Companies. It trades about 0.03 of its total potential returns per unit of risk. Williams Companies is currently generating about 0.09 per unit of volatility. If you would invest  5,368  in Williams Companies on December 29, 2024 and sell it today you would earn a total of  575.00  from holding Williams Companies or generate 10.71% return on investment over 90 days.

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

Citigroup  vs.  Williams Companies

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.

Williams Companies

Risk-Adjusted Performance

OK

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

Pair Trading with Citigroup and Williams Companies

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

The idea behind Citigroup and Williams Companies 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.