Correlation Between Citigroup and WisdomTree Renewable

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

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

Diversification Opportunities for Citigroup and WisdomTree Renewable

-0.6

Correlation Coefficient

Citigroup  WisdomTree Renewable

Excellent diversification

The 3 months correlation between Citigroup and WisdomTree is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WisdomTree Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Renewable 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 WisdomTree Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Renewable has no effect on the direction of Citigroup i.e., Citigroup and WisdomTree Renewable go up and down completely randomly.

Pair Corralation between Citigroup and WisdomTree Renewable

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.2 times more return on investment than WisdomTree Renewable. However, Citigroup is 1.2 times more volatile than WisdomTree Renewable Energy. It trades about 0.1 of its potential returns per unit of risk. WisdomTree Renewable Energy is currently generating about -0.06 per unit of risk. If you would invest  4,950  in Citigroup on September 20, 2024 and sell it today you would earn a total of  2,162  from holding Citigroup or generate 43.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.02%
Values	Daily Returns

Citigroup  vs.  WisdomTree Renewable Energy

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

WisdomTree Renewable

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, WisdomTree Renewable is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and WisdomTree Renewable

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

The idea behind Citigroup and WisdomTree Renewable 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.