Correlation Between Citigroup and DNB Norge

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

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

Diversification Opportunities for Citigroup and DNB Norge

0.3

Correlation Coefficient

Citigroup  DNB Norge

Weak diversification

The 3 months correlation between Citigroup and DNB is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and DNB Norge Selektiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB Norge Selektiv 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 DNB Norge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB Norge Selektiv has no effect on the direction of Citigroup i.e., Citigroup and DNB Norge go up and down completely randomly.

Pair Corralation between Citigroup and DNB Norge

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.74 times more return on investment than DNB Norge. However, Citigroup is 2.74 times more volatile than DNB Norge Selektiv. It trades about 0.14 of its potential returns per unit of risk. DNB Norge Selektiv is currently generating about 0.01 per unit of risk. If you would invest  6,159  in Citigroup on September 20, 2024 and sell it today you would earn a total of  953.00  from holding Citigroup or generate 15.47% return on investment over 90 days.

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

Citigroup  vs.  DNB Norge Selektiv

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 rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

DNB Norge Selektiv

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DNB Norge Selektiv are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, DNB Norge is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and DNB Norge

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

The idea behind Citigroup and DNB Norge Selektiv 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.