Correlation Between Citigroup and Newlake Capital

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

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

Diversification Opportunities for Citigroup and Newlake Capital

-0.71

Correlation Coefficient

Citigroup  Newlake Capital

Pay attention - limited upside

The 3 months correlation between Citigroup and Newlake is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners 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 Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Citigroup i.e., Citigroup and Newlake Capital go up and down completely randomly.

Pair Corralation between Citigroup and Newlake Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.45 times more return on investment than Newlake Capital. However, Citigroup is 1.45 times more volatile than Newlake Capital Partners. It trades about 0.13 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about -0.04 per unit of risk. If you would invest  6,092  in Citigroup on September 1, 2024 and sell it today you would earn a total of  995.00  from holding Citigroup or generate 16.33% return on investment over 90 days.

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

Citigroup  vs.  Newlake Capital Partners

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.

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Newlake Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Newlake Capital

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

The idea behind Citigroup and Newlake Capital Partners 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.