Correlation Between Citigroup and NC Housing

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

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

Diversification Opportunities for Citigroup and NC Housing

-0.83

Correlation Coefficient

Citigroup  NC Housing

Pay attention - limited upside

The 3 months correlation between Citigroup and NCH is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NC Housing Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NC Housing Public 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 NC Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NC Housing Public has no effect on the direction of Citigroup i.e., Citigroup and NC Housing go up and down completely randomly.

Pair Corralation between Citigroup and NC Housing

Taking into account the 90-day investment horizon Citigroup is expected to generate 15.52 times less return on investment than NC Housing. But when comparing it to its historical volatility, Citigroup is 28.07 times less risky than NC Housing. It trades about 0.07 of its potential returns per unit of risk. NC Housing Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  136.00  in NC Housing Public on September 24, 2024 and sell it today you would lose (65.00) from holding NC Housing Public or give up 47.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.79%
Values	Daily Returns

Citigroup  vs.  NC Housing Public

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

NC Housing Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NC Housing Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Citigroup and NC Housing

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

The idea behind Citigroup and NC Housing Public 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.