Correlation Between Citigroup and Chesapeake Granite

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

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

Diversification Opportunities for Citigroup and Chesapeake Granite

0.7

Correlation Coefficient

Citigroup  Chesapeake Granite

Poor diversification

The 3 months correlation between Citigroup and Chesapeake is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Chesapeake Granite Wash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Granite Wash 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 Chesapeake Granite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Granite Wash has no effect on the direction of Citigroup i.e., Citigroup and Chesapeake Granite go up and down completely randomly.

Pair Corralation between Citigroup and Chesapeake Granite

If you would invest  6,230  in Citigroup on September 26, 2024 and sell it today you would earn a total of  870.00  from holding Citigroup or generate 13.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.79%
Values	Daily Returns

Citigroup  vs.  Chesapeake Granite Wash

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 rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Chesapeake Granite

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

The idea behind Citigroup and Chesapeake Granite Wash 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.