Correlation Between Citigroup and Nortec Minerals

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

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

Diversification Opportunities for Citigroup and Nortec Minerals

0.37

Correlation Coefficient

Citigroup  Nortec Minerals

Weak diversification

The 3 months correlation between Citigroup and Nortec is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nortec Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortec Minerals Corp 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 Nortec Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortec Minerals Corp has no effect on the direction of Citigroup i.e., Citigroup and Nortec Minerals go up and down completely randomly.

Pair Corralation between Citigroup and Nortec Minerals

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.18 times more return on investment than Nortec Minerals. However, Citigroup is 5.67 times less risky than Nortec Minerals. It trades about 0.06 of its potential returns per unit of risk. Nortec Minerals Corp is currently generating about -0.21 per unit of risk. If you would invest  6,828  in Citigroup on September 21, 2024 and sell it today you would earn a total of  91.00  from holding Citigroup or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Nortec Minerals Corp

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nortec Minerals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nortec Minerals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nortec Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Nortec Minerals

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

The idea behind Citigroup and Nortec Minerals Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.