Correlation Between Citigroup and Capstone Green

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

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

Diversification Opportunities for Citigroup and Capstone Green

-0.78

Correlation Coefficient

Citigroup  Capstone Green

Pay attention - limited upside

The 3 months correlation between Citigroup and Capstone is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Capstone Green Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Green Energy 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 Capstone Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Green Energy has no effect on the direction of Citigroup i.e., Citigroup and Capstone Green go up and down completely randomly.

Pair Corralation between Citigroup and Capstone Green

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.33 times less return on investment than Capstone Green. But when comparing it to its historical volatility, Citigroup is 15.52 times less risky than Capstone Green. It trades about 0.12 of its potential returns per unit of risk. Capstone Green Energy is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Capstone Green Energy on January 25, 2024 and sell it today you would lose (101.00) from holding Capstone Green Energy or give up 83.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	54.59%
Values	Daily Returns

Citigroup  vs.  Capstone Green Energy

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Capstone Green Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Green Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Capstone Green 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 Capstone Green

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

The idea behind Citigroup and Capstone Green Energy 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.