Correlation Between Citigroup and Whitecap Resources

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

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

Diversification Opportunities for Citigroup and Whitecap Resources

0.37

Correlation Coefficient

Citigroup  Whitecap Resources

Weak diversification

The 3 months correlation between Citigroup and Whitecap is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Whitecap Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitecap 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 Whitecap Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitecap Resources has no effect on the direction of Citigroup i.e., Citigroup and Whitecap Resources go up and down completely randomly.

Pair Corralation between Citigroup and Whitecap Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.54 times more return on investment than Whitecap Resources. However, Citigroup is 1.54 times more volatile than Whitecap Resources. It trades about 0.32 of its potential returns per unit of risk. Whitecap Resources is currently generating about -0.04 per unit of risk. If you would invest  6,235  in Citigroup on September 3, 2024 and sell it today you would earn a total of  852.00  from holding Citigroup or generate 13.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

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

Whitecap Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Whitecap Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Whitecap Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Whitecap Resources

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

The idea behind Citigroup and Whitecap 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.