Correlation Between Citigroup and Marine Petroleum

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

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

Diversification Opportunities for Citigroup and Marine Petroleum

-0.51

Correlation Coefficient

Citigroup  Marine Petroleum

Excellent diversification

The 3 months correlation between Citigroup and Marine is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Marine Petroleum Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Petroleum Trust 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 Marine Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Petroleum Trust has no effect on the direction of Citigroup i.e., Citigroup and Marine Petroleum go up and down completely randomly.

Pair Corralation between Citigroup and Marine Petroleum

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times more return on investment than Marine Petroleum. However, Citigroup is 1.16 times more volatile than Marine Petroleum Trust. It trades about -0.09 of its potential returns per unit of risk. Marine Petroleum Trust 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Marine Petroleum Trust

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.

Marine Petroleum Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marine Petroleum Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Marine Petroleum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Marine Petroleum

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

The idea behind Citigroup and Marine Petroleum Trust 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.