Correlation Between Citigroup and Chevron Corp

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Chevron Corp, you can compare the effects of market volatilities on Citigroup and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Chevron Corp.

Diversification Opportunities for Citigroup and Chevron Corp

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Citigroup and Chevron is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Citigroup i.e., Citigroup and Chevron Corp go up and down completely randomly.

Pair Corralation between Citigroup and Chevron Corp

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.04 times more return on investment than Chevron Corp. However, Citigroup is 1.04 times more volatile than Chevron Corp. It trades about 0.58 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.17 per unit of risk. If you would invest  5,571  in Citigroup on December 29, 2023 and sell it today you would earn a total of  753.00  from holding Citigroup or generate 13.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Citigroup  vs.  Chevron Corp

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Chevron Corp 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Citigroup and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Chevron Corp

The main advantage of trading using opposite Citigroup and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
The idea behind Citigroup and Chevron Corp 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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