Correlation Between Citigroup and Cheniere Energy

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

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

Diversification Opportunities for Citigroup and Cheniere Energy

0.95

Correlation Coefficient

Citigroup  Cheniere Energy

Almost no diversification

The 3 months correlation between Citigroup and Cheniere is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of Citigroup i.e., Citigroup and Cheniere Energy go up and down completely randomly.

Pair Corralation between Citigroup and Cheniere Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.0 times more return on investment than Cheniere Energy. However, Citigroup is 1.0 times less risky than Cheniere Energy. It trades about -0.09 of its potential returns per unit of risk. Cheniere Energy is currently generating about -0.19 per unit of risk. If you would invest  7,075  in Citigroup on September 24, 2024 and sell it today you would lose (156.00) from holding Citigroup or give up 2.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Cheniere Energy

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Cheniere Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Cheniere Energy

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

The idea behind Citigroup and Cheniere 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.