Correlation Between Citigroup and PacifiCorp

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

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

Diversification Opportunities for Citigroup and PacifiCorp

0.82

Correlation Coefficient

Citigroup  PacifiCorp

Very poor diversification

The 3 months correlation between Citigroup and PacifiCorp is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Citigroup i.e., Citigroup and PacifiCorp go up and down completely randomly.

Pair Corralation between Citigroup and PacifiCorp

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times less return on investment than PacifiCorp. But when comparing it to its historical volatility, Citigroup is 2.96 times less risky than PacifiCorp. It trades about 0.2 of its potential returns per unit of risk. PacifiCorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,500  in PacifiCorp on September 13, 2024 and sell it today you would earn a total of  2,995  from holding PacifiCorp or generate 28.52% return on investment over 90 days.

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

Citigroup  vs.  PacifiCorp

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

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.

PacifiCorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PacifiCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, PacifiCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and PacifiCorp

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

The idea behind Citigroup and PacifiCorp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.