Correlation Between Citigroup and Westlake Chemical

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

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

Diversification Opportunities for Citigroup and Westlake Chemical

-0.81

Correlation Coefficient

Citigroup  Westlake Chemical

Pay attention - limited upside

The 3 months correlation between Citigroup and Westlake is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Westlake Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical Corp 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 Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical Corp has no effect on the direction of Citigroup i.e., Citigroup and Westlake Chemical go up and down completely randomly.

Pair Corralation between Citigroup and Westlake Chemical

Assuming the 90 days trading horizon Citigroup is expected to generate 0.65 times more return on investment than Westlake Chemical. However, Citigroup is 1.55 times less risky than Westlake Chemical. It trades about -0.02 of its potential returns per unit of risk. Westlake Chemical Corp is currently generating about -0.4 per unit of risk. If you would invest  7,002  in Citigroup on September 25, 2024 and sell it today you would lose (42.00) from holding Citigroup or give up 0.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Citigroup  vs.  Westlake Chemical Corp

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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 comparatively uncertain basic indicators, Citigroup unveiled solid returns over the last few months and may actually be approaching a breakup point.

Westlake Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westlake Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Citigroup and Westlake Chemical

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

The idea behind Citigroup and Westlake Chemical Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.