Correlation Between Citigroup and Nabors Energy

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

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

Diversification Opportunities for Citigroup and Nabors Energy

0.27

Correlation Coefficient

Citigroup  Nabors Energy

Modest diversification

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

Pair Corralation between Citigroup and Nabors Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 9.54 times more return on investment than Nabors Energy. However, Citigroup is 9.54 times more volatile than Nabors Energy Transition. It trades about 0.1 of its potential returns per unit of risk. Nabors Energy Transition is currently generating about 0.21 per unit of risk. If you would invest  6,203  in Citigroup on September 22, 2024 and sell it today you would earn a total of  716.00  from holding Citigroup or generate 11.54% return on investment over 90 days.

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

Citigroup  vs.  Nabors Energy Transition

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nabors Energy Transition

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Nabors Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Nabors Energy

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

The idea behind Citigroup and Nabors Energy Transition 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.