Correlation Between Citigroup and Woodside Petroleum

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

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

Diversification Opportunities for Citigroup and Woodside Petroleum

-0.29

Correlation Coefficient

Citigroup  Woodside Petroleum

Very good diversification

The 3 months correlation between Citigroup and Woodside is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Woodside Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodside Petroleum 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 Woodside Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodside Petroleum has no effect on the direction of Citigroup i.e., Citigroup and Woodside Petroleum go up and down completely randomly.

Pair Corralation between Citigroup and Woodside Petroleum

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.26 times more return on investment than Woodside Petroleum. However, Citigroup is 3.82 times less risky than Woodside Petroleum. It trades about 0.08 of its potential returns per unit of risk. Woodside Petroleum is currently generating about 0.02 per unit of risk. If you would invest  4,054  in Citigroup on September 12, 2024 and sell it today you would earn a total of  3,196  from holding Citigroup or generate 78.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.18%
Values	Daily Returns

Citigroup  vs.  Woodside Petroleum

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Woodside Petroleum

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Woodside Petroleum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Woodside Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Woodside Petroleum

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

The idea behind Citigroup and Woodside Petroleum 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.