Correlation Between Citigroup and GULF ENERGY

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

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

Diversification Opportunities for Citigroup and GULF ENERGY

0.64

Correlation Coefficient

Citigroup  GULF ENERGY

Poor diversification

The 3 months correlation between Citigroup and GULF is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and GULF ENERGY DEVELOPMENT NVDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GULF ENERGY DEVELOPMENT 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 GULF ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GULF ENERGY DEVELOPMENT has no effect on the direction of Citigroup i.e., Citigroup and GULF ENERGY go up and down completely randomly.

Pair Corralation between Citigroup and GULF ENERGY

Taking into account the 90-day investment horizon Citigroup is expected to generate 53.74 times less return on investment than GULF ENERGY. But when comparing it to its historical volatility, Citigroup is 5.27 times less risky than GULF ENERGY. It trades about 0.02 of its potential returns per unit of risk. GULF ENERGY DEVELOPMENT NVDR is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4,750  in GULF ENERGY DEVELOPMENT NVDR on September 25, 2024 and sell it today you would earn a total of  1,225  from holding GULF ENERGY DEVELOPMENT NVDR or generate 25.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  GULF ENERGY DEVELOPMENT NVDR

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

GULF ENERGY DEVELOPMENT

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GULF ENERGY DEVELOPMENT NVDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, GULF ENERGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and GULF ENERGY

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

The idea behind Citigroup and GULF ENERGY DEVELOPMENT NVDR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.