Correlation Between Citigroup and New Sources

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

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

Diversification Opportunities for Citigroup and New Sources

0.38

Correlation Coefficient

Citigroup  New Sources

Weak diversification

The 3 months correlation between Citigroup and New is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and New Sources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Sources Energy 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 Sources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Sources Energy has no effect on the direction of Citigroup i.e., Citigroup and New Sources go up and down completely randomly.

Pair Corralation between Citigroup and New Sources

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.38 times more return on investment than New Sources. However, Citigroup is 2.65 times less risky than New Sources. It trades about 0.19 of its potential returns per unit of risk. New Sources Energy is currently generating about 0.04 per unit of risk. If you would invest  5,788  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,408  from holding Citigroup or generate 24.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  New Sources Energy

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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 Sources Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Sources Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, New Sources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and New Sources

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

The idea behind Citigroup and New Sources Energy 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.