Correlation Between Citigroup and Steelpath Select

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

By analyzing existing cross correlation between Citigroup and Steelpath Select 40, you can compare the effects of market volatilities on Citigroup and Steelpath Select 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 Steelpath Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Steelpath Select.

Diversification Opportunities for Citigroup and Steelpath Select

0.4

Correlation Coefficient

Citigroup  Steelpath Select

Very weak diversification

The 3 months correlation between Citigroup and Steelpath is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Steelpath Select 40 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steelpath Select 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 Steelpath Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steelpath Select has no effect on the direction of Citigroup i.e., Citigroup and Steelpath Select go up and down completely randomly.

Pair Corralation between Citigroup and Steelpath Select

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.69 times more return on investment than Steelpath Select. However, Citigroup is 1.69 times more volatile than Steelpath Select 40. It trades about 0.36 of its potential returns per unit of risk. Steelpath Select 40 is currently generating about 0.04 per unit of risk. If you would invest  7,003  in Citigroup on May 2, 2025 and sell it today you would earn a total of  2,578  from holding Citigroup or generate 36.81% return on investment over 90 days.

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

Citigroup  vs.  Steelpath Select 40

Citigroup

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Steelpath Select

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Steelpath Select 40 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Steelpath Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Steelpath Select

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

The idea behind Citigroup and Steelpath Select 40 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.