Correlation Between Citigroup and Precision Drilling

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

Diversification Opportunities for Citigroup and Precision Drilling

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Citigroup and Precision is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of Citigroup i.e., Citigroup and Precision Drilling go up and down completely randomly.

Pair Corralation between Citigroup and Precision Drilling

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than Precision Drilling. However, Citigroup is 1.67 times less risky than Precision Drilling. It trades about 0.38 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.13 per unit of risk. If you would invest  6,789  in Citigroup on April 25, 2025 and sell it today you would earn a total of  2,750  from holding Citigroup or generate 40.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.41%
ValuesDaily Returns

Citigroup  vs.  Precision Drilling

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Precision Drilling 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Precision Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Precision Drilling displayed solid returns over the last few months and may actually be approaching a breakup point.

Citigroup and Precision Drilling Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Precision Drilling

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

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