Correlation Between Citigroup and Nahar Poly

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

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

Diversification Opportunities for Citigroup and Nahar Poly

0.5

Correlation Coefficient

Citigroup  Nahar Poly

Very weak diversification

The 3 months correlation between Citigroup and Nahar is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nahar Poly Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nahar Poly Films 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 Nahar Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nahar Poly Films has no effect on the direction of Citigroup i.e., Citigroup and Nahar Poly go up and down completely randomly.

Pair Corralation between Citigroup and Nahar Poly

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.76 times more return on investment than Nahar Poly. However, Citigroup is 1.31 times less risky than Nahar Poly. It trades about 0.2 of its potential returns per unit of risk. Nahar Poly Films is currently generating about 0.11 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,480  from holding Citigroup or generate 25.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Nahar Poly Films

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Nahar Poly Films

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nahar Poly Films are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Nahar Poly displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Nahar Poly

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

The idea behind Citigroup and Nahar Poly Films 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.