Correlation Between CITIGROUP and Montauk Renewables

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

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

Diversification Opportunities for CITIGROUP and Montauk Renewables

0.58

Correlation Coefficient

CITIGROUP  Montauk Renewables

Very weak diversification

The 3 months correlation between CITIGROUP and Montauk is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding CITIGROUP INC and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 INC are associated (or correlated) with Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of CITIGROUP i.e., CITIGROUP and Montauk Renewables go up and down completely randomly.

Pair Corralation between CITIGROUP and Montauk Renewables

Assuming the 90 days trading horizon CITIGROUP INC is expected to generate 0.09 times more return on investment than Montauk Renewables. However, CITIGROUP INC is 10.77 times less risky than Montauk Renewables. It trades about -0.13 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.03 per unit of risk. If you would invest  9,585  in CITIGROUP INC on December 5, 2024 and sell it today you would lose (349.00) from holding CITIGROUP INC or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

CITIGROUP INC  vs.  Montauk Renewables

CITIGROUP INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIGROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITIGROUP is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Montauk Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with CITIGROUP and Montauk Renewables

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

The idea behind CITIGROUP INC and Montauk Renewables 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.