Correlation Between 51Talk Online and CITGO

Can any of the company-specific risk be diversified away by investing in both 51Talk Online and CITGO 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 51Talk Online and CITGO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 51Talk Online Education and CITGO Petroleum 7, you can compare the effects of market volatilities on 51Talk Online and CITGO 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 51Talk Online with a short position of CITGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of 51Talk Online and CITGO.

Diversification Opportunities for 51Talk Online and CITGO

-0.26

Correlation Coefficient

51Talk Online  CITGO

Very good diversification

The 3 months correlation between 51Talk and CITGO is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding 51Talk Online Education and CITGO Petroleum 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITGO Petroleum 7 and 51Talk Online 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 51Talk Online Education are associated (or correlated) with CITGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITGO Petroleum 7 has no effect on the direction of 51Talk Online i.e., 51Talk Online and CITGO go up and down completely randomly.

Pair Corralation between 51Talk Online and CITGO

Considering the 90-day investment horizon 51Talk Online is expected to generate 16.13 times less return on investment than CITGO. But when comparing it to its historical volatility, 51Talk Online Education is 17.88 times less risky than CITGO. It trades about 0.07 of its potential returns per unit of risk. CITGO Petroleum 7 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,967  in CITGO Petroleum 7 on September 26, 2024 and sell it today you would earn a total of  31.00  from holding CITGO Petroleum 7 or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.89%
Values	Daily Returns

51Talk Online Education  vs.  CITGO Petroleum 7

51Talk Online Education

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 51Talk Online Education are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, 51Talk Online may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CITGO Petroleum 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITGO Petroleum 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITGO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 51Talk Online and CITGO

The main advantage of trading using opposite 51Talk Online and CITGO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 51Talk Online position performs unexpectedly, CITGO 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 CITGO will offset losses from the drop in CITGO's long position.

The idea behind 51Talk Online Education and CITGO Petroleum 7 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.