Correlation Between Citigroup and Williston Basinmid

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

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

Diversification Opportunities for Citigroup and Williston Basinmid

0.91

Correlation Coefficient

Citigroup  Williston Basinmid

Almost no diversification

The 3 months correlation between Citigroup and Williston is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Williston Basinmid North Ameri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williston Basinmid 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 Williston Basinmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williston Basinmid has no effect on the direction of Citigroup i.e., Citigroup and Williston Basinmid go up and down completely randomly.

Pair Corralation between Citigroup and Williston Basinmid

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.72 times more return on investment than Williston Basinmid. However, Citigroup is 1.72 times more volatile than Williston Basinmid North America. It trades about 0.18 of its potential returns per unit of risk. Williston Basinmid North America is currently generating about 0.13 per unit of risk. If you would invest  5,788  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% 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.  Williston Basinmid North Ameri

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Williston Basinmid

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williston Basinmid North America are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Williston Basinmid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Williston Basinmid

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

The idea behind Citigroup and Williston Basinmid North America 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.