Correlation Between NOV and Citigroup

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

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

Diversification Opportunities for NOV and Citigroup

0.48

Correlation Coefficient

NOV  Citigroup

Very weak diversification

The 3 months correlation between NOV and Citigroup is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding NOV Inc and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and NOV 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 NOV Inc are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of NOV i.e., NOV and Citigroup go up and down completely randomly.

Pair Corralation between NOV and Citigroup

Assuming the 90 days trading horizon NOV Inc is expected to generate 0.1 times more return on investment than Citigroup. However, NOV Inc is 9.79 times less risky than Citigroup. It trades about 0.22 of its potential returns per unit of risk. Citigroup is currently generating about -0.02 per unit of risk. If you would invest  32,092  in NOV Inc on September 27, 2024 and sell it today you would earn a total of  152.00  from holding NOV Inc or generate 0.47% return on investment over 90 days.

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

NOV Inc  vs.  Citigroup

NOV Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NOV Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, NOV is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Citigroup showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NOV and Citigroup

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

The idea behind NOV Inc and Citigroup 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.