Correlation Between Citigroup and Vulcan Energy

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

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

Diversification Opportunities for Citigroup and Vulcan Energy

0.83

Correlation Coefficient

Citigroup  Vulcan Energy

Very poor diversification

The 3 months correlation between Citigroup and Vulcan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy Resources 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of Citigroup i.e., Citigroup and Vulcan Energy go up and down completely randomly.

Pair Corralation between Citigroup and Vulcan Energy

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.81 times less return on investment than Vulcan Energy. But when comparing it to its historical volatility, Citigroup is 3.02 times less risky than Vulcan Energy. It trades about 0.08 of its potential returns per unit of risk. Vulcan Energy Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Vulcan Energy Resources on September 25, 2024 and sell it today you would earn a total of  161.00  from holding Vulcan Energy Resources or generate 91.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Vulcan Energy Resources

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Vulcan Energy Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Vulcan Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Vulcan Energy

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

The idea behind Citigroup and Vulcan Energy Resources 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.