Correlation Between Citigroup and Short Nasdaq

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

By analyzing existing cross correlation between Citigroup and Short Nasdaq 100 Profund, you can compare the effects of market volatilities on Citigroup and Short Nasdaq 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 Short Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Short Nasdaq.

Diversification Opportunities for Citigroup and Short Nasdaq

-0.9

Correlation Coefficient

Citigroup  Short Nasdaq

Pay attention - limited upside

The 3 months correlation between Citigroup and Short is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Short Nasdaq 100 Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Nasdaq 100 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 Short Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Nasdaq 100 has no effect on the direction of Citigroup i.e., Citigroup and Short Nasdaq go up and down completely randomly.

Pair Corralation between Citigroup and Short Nasdaq

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.78 times more return on investment than Short Nasdaq. However, Citigroup is 1.78 times more volatile than Short Nasdaq 100 Profund. It trades about 0.1 of its potential returns per unit of risk. Short Nasdaq 100 Profund is currently generating about -0.07 per unit of risk. If you would invest  6,203  in Citigroup on September 23, 2024 and sell it today you would earn a total of  716.00  from holding Citigroup or generate 11.54% return on investment over 90 days.

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

Citigroup  vs.  Short Nasdaq 100 Profund

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 unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Short Nasdaq 100

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Nasdaq 100 Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Nasdaq is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Short Nasdaq

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

The idea behind Citigroup and Short Nasdaq 100 Profund 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.