Correlation Between Citigroup and New Trend

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

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

Diversification Opportunities for Citigroup and New Trend

0.59

Correlation Coefficient

Citigroup  New Trend

Very weak diversification

The 3 months correlation between Citigroup and New is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and New Trend International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Trend International 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 New Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Trend International has no effect on the direction of Citigroup i.e., Citigroup and New Trend go up and down completely randomly.

Pair Corralation between Citigroup and New Trend

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.28 times less return on investment than New Trend. But when comparing it to its historical volatility, Citigroup is 2.72 times less risky than New Trend. It trades about 0.16 of its potential returns per unit of risk. New Trend International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  908.00  in New Trend International on September 18, 2024 and sell it today you would earn a total of  351.00  from holding New Trend International or generate 38.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.19%
Values	Daily Returns

Citigroup  vs.  New Trend International

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.

New Trend International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Trend International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New Trend sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and New Trend

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

The idea behind Citigroup and New Trend International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..