Correlation Between Citigroup and SPI Energy

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

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

Diversification Opportunities for Citigroup and SPI Energy

-0.28

Correlation Coefficient

Citigroup  SPI Energy

Very good diversification

The 3 months correlation between Citigroup and SPI is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SPI Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPI Energy 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 SPI Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPI Energy has no effect on the direction of Citigroup i.e., Citigroup and SPI Energy go up and down completely randomly.

Pair Corralation between Citigroup and SPI Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.08 times less return on investment than SPI Energy. But when comparing it to its historical volatility, Citigroup is 6.12 times less risky than SPI Energy. It trades about 0.11 of its potential returns per unit of risk. SPI Energy Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  33.00  in SPI Energy Co on August 30, 2024 and sell it today you would lose (3.40) from holding SPI Energy Co or give up 10.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  SPI Energy Co

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

SPI Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPI Energy Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, SPI Energy demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and SPI Energy

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

The idea behind Citigroup and SPI Energy Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.