Correlation Between Chevron Corp and Citigroup

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

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

Diversification Opportunities for Chevron Corp and Citigroup

0.84

Correlation Coefficient

Chevron Corp  Citigroup

Very poor diversification

The 3 months correlation between Chevron and Citigroup is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Citigroup go up and down completely randomly.

Pair Corralation between Chevron Corp and Citigroup

Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Citigroup. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.06 times less risky than Citigroup. The stock trades about -0.01 of its potential returns per unit of risk. The Citigroup is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,688  in Citigroup on January 19, 2024 and sell it today you would earn a total of  1,144  from holding Citigroup or generate 24.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Chevron Corp  vs.  Citigroup

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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 Chevron Corp and Citigroup

The main advantage of trading using opposite Chevron Corp and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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 Chevron Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.