Correlation Between Citigroup and Naked Wines

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

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

Diversification Opportunities for Citigroup and Naked Wines

-0.55

Correlation Coefficient

Citigroup  Naked Wines

Excellent diversification

The 3 months correlation between Citigroup and Naked is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Naked Wines plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Naked Wines plc 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 Naked Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Naked Wines plc has no effect on the direction of Citigroup i.e., Citigroup and Naked Wines go up and down completely randomly.

Pair Corralation between Citigroup and Naked Wines

Assuming the 90 days trading horizon Citigroup is expected to generate 0.39 times more return on investment than Naked Wines. However, Citigroup is 2.58 times less risky than Naked Wines. It trades about 0.0 of its potential returns per unit of risk. Naked Wines plc is currently generating about -0.18 per unit of risk. If you would invest  7,137  in Citigroup on October 1, 2024 and sell it today you would lose (17.00) from holding Citigroup or give up 0.24% of portfolio value over 90 days.

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

Citigroup  vs.  Naked Wines plc

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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

Naked Wines plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Naked Wines plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Citigroup and Naked Wines

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

The idea behind Citigroup and Naked Wines plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.