Correlation Between Citigroup and Nam Kim

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

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

Diversification Opportunities for Citigroup and Nam Kim

-0.67

Correlation Coefficient

Citigroup  Nam Kim

Excellent diversification

The 3 months correlation between Citigroup and Nam is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nam Kim Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nam Kim Steel 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 Nam Kim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nam Kim Steel has no effect on the direction of Citigroup i.e., Citigroup and Nam Kim go up and down completely randomly.

Pair Corralation between Citigroup and Nam Kim

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.69 times more return on investment than Nam Kim. However, Citigroup is 1.45 times less risky than Nam Kim. It trades about 0.13 of its potential returns per unit of risk. Nam Kim Steel is currently generating about -0.22 per unit of risk. If you would invest  6,205  in Citigroup on September 29, 2024 and sell it today you would earn a total of  895.00  from holding Citigroup or generate 14.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Citigroup  vs.  Nam Kim Steel

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.

Nam Kim Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nam Kim Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Citigroup and Nam Kim

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

The idea behind Citigroup and Nam Kim Steel 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.