Correlation Between Citigroup and Naturgy Energy

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

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

Diversification Opportunities for Citigroup and Naturgy Energy

0.27

Correlation Coefficient

Citigroup  Naturgy Energy

Modest diversification

The 3 months correlation between Citigroup and Naturgy is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Naturgy Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naturgy Energy Group 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 Naturgy Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naturgy Energy Group has no effect on the direction of Citigroup i.e., Citigroup and Naturgy Energy go up and down completely randomly.

Pair Corralation between Citigroup and Naturgy Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.93 times more return on investment than Naturgy Energy. However, Citigroup is 1.07 times less risky than Naturgy Energy. It trades about 0.06 of its potential returns per unit of risk. Naturgy Energy Group is currently generating about 0.01 per unit of risk. If you would invest  6,297  in Citigroup on September 13, 2024 and sell it today you would earn a total of  846.00  from holding Citigroup or generate 13.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.33%
Values	Daily Returns

Citigroup  vs.  Naturgy Energy Group

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Naturgy Energy Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Naturgy Energy Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Naturgy Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Naturgy Energy

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

The idea behind Citigroup and Naturgy Energy Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.