Correlation Between Citigroup and N1WG34

Can any of the company-specific risk be diversified away by investing in both Citigroup and N1WG34 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 N1WG34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and N1WG34, you can compare the effects of market volatilities on Citigroup and N1WG34 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 N1WG34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and N1WG34.

Diversification Opportunities for Citigroup and N1WG34

0.96

Correlation Coefficient

Citigroup  N1WG34

Almost no diversification

The 3 months correlation between Citigroup and N1WG34 is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and N1WG34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N1WG34 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 N1WG34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N1WG34 has no effect on the direction of Citigroup i.e., Citigroup and N1WG34 go up and down completely randomly.

Pair Corralation between Citigroup and N1WG34

Assuming the 90 days trading horizon Citigroup is expected to generate 1.04 times more return on investment than N1WG34. However, Citigroup is 1.04 times more volatile than N1WG34. It trades about 0.25 of its potential returns per unit of risk. N1WG34 is currently generating about 0.21 per unit of risk. If you would invest  5,643  in Citigroup on September 28, 2024 and sell it today you would earn a total of  1,722  from holding Citigroup or generate 30.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  N1WG34

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Citigroup sustained solid returns over the last few months and may actually be approaching a breakup point.

N1WG34

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N1WG34 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N1WG34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and N1WG34

The main advantage of trading using opposite Citigroup and N1WG34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, N1WG34 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 N1WG34 will offset losses from the drop in N1WG34's long position.

The idea behind Citigroup and N1WG34 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.