Correlation Between Citigroup and Northwest Biotherapeutics

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

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

Diversification Opportunities for Citigroup and Northwest Biotherapeutics

-0.45

Correlation Coefficient

Citigroup  Northwest Biotherapeutics

Very good diversification

The 3 months correlation between Citigroup and Northwest is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Northwest Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Biotherapeutics 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 Northwest Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Biotherapeutics has no effect on the direction of Citigroup i.e., Citigroup and Northwest Biotherapeutics go up and down completely randomly.

Pair Corralation between Citigroup and Northwest Biotherapeutics

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.45 times more return on investment than Northwest Biotherapeutics. However, Citigroup is 2.25 times less risky than Northwest Biotherapeutics. It trades about 0.13 of its potential returns per unit of risk. Northwest Biotherapeutics is currently generating about -0.05 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Northwest Biotherapeutics

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.

Northwest Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northwest Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Citigroup and Northwest Biotherapeutics

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

The idea behind Citigroup and Northwest Biotherapeutics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.