Correlation Between Citigroup and Whitehaven Coal

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

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

Diversification Opportunities for Citigroup and Whitehaven Coal

-0.2

Correlation Coefficient

Citigroup  Whitehaven Coal

Good diversification

The 3 months correlation between Citigroup and Whitehaven is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Citigroup i.e., Citigroup and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Citigroup and Whitehaven Coal

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.84 times more return on investment than Whitehaven Coal. However, Citigroup is 1.2 times less risky than Whitehaven Coal. It trades about 0.14 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about 0.07 per unit of risk. If you would invest  6,159  in Citigroup on September 20, 2024 and sell it today you would earn a total of  953.00  from holding Citigroup or generate 15.47% return on investment over 90 days.

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

Citigroup  vs.  Whitehaven Coal Limited

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Whitehaven Coal

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Whitehaven Coal Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Whitehaven Coal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Whitehaven Coal

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

The idea behind Citigroup and Whitehaven Coal Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.