Correlation Between Citigroup and DT Midstream

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

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

Diversification Opportunities for Citigroup and DT Midstream

0.94

Correlation Coefficient

Citigroup  DT Midstream

Almost no diversification

The 3 months correlation between Citigroup and DTM is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream 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 DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Citigroup i.e., Citigroup and DT Midstream go up and down completely randomly.

Pair Corralation between Citigroup and DT Midstream

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.33 times less return on investment than DT Midstream. In addition to that, Citigroup is 1.48 times more volatile than DT Midstream. It trades about 0.06 of its total potential returns per unit of risk. DT Midstream is currently generating about 0.3 per unit of volatility. If you would invest  6,231  in DT Midstream on September 3, 2024 and sell it today you would earn a total of  4,381  from holding DT Midstream or generate 70.31% return on investment over 90 days.

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

Citigroup  vs.  DT Midstream

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

DT Midstream

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, DT Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and DT Midstream

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

The idea behind Citigroup and DT Midstream 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.