Correlation Between Citigroup and New Hope

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

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

Diversification Opportunities for Citigroup and New Hope

0.19

Correlation Coefficient

Citigroup  New Hope

Average diversification

The 3 months correlation between Citigroup and New is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope 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 Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of Citigroup i.e., Citigroup and New Hope go up and down completely randomly.

Pair Corralation between Citigroup and New Hope

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.22 times less return on investment than New Hope. But when comparing it to its historical volatility, Citigroup is 1.35 times less risky than New Hope. It trades about 0.12 of its potential returns per unit of risk. New Hope is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  258.00  in New Hope on September 19, 2024 and sell it today you would earn a total of  43.00  from holding New Hope or generate 16.67% return on investment over 90 days.

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

Citigroup  vs.  New Hope

Citigroup

Risk-Adjusted Performance

9 of 100

Good

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

New Hope

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, New Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and New Hope

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

The idea behind Citigroup and New Hope 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.