Correlation Between Permian Basin and Citigroup

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

By analyzing existing cross correlation between Permian Basin Royalty and Citigroup, you can compare the effects of market volatilities on Permian Basin and Citigroup 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 Permian Basin with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Basin and Citigroup.

Diversification Opportunities for Permian Basin and Citigroup

-0.57

Correlation Coefficient

Permian Basin  Citigroup

Excellent diversification

The 3 months correlation between Permian and Citigroup is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Permian Basin Royalty and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Permian Basin 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 Permian Basin Royalty are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Permian Basin i.e., Permian Basin and Citigroup go up and down completely randomly.

Pair Corralation between Permian Basin and Citigroup

Considering the 90-day investment horizon Permian Basin is expected to generate 3.85 times less return on investment than Citigroup. In addition to that, Permian Basin is 1.46 times more volatile than Citigroup. It trades about 0.01 of its total potential returns per unit of risk. Citigroup is currently generating about 0.05 per unit of volatility. If you would invest  6,166  in Citigroup on January 26, 2024 and sell it today you would earn a total of  81.00  from holding Citigroup or generate 1.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Permian Basin Royalty  vs.  Citigroup

Permian Basin Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Permian Basin Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Permian Basin and Citigroup

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

The idea behind Permian Basin Royalty and Citigroup 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.