Correlation Between Citigroup and Newtek Business

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

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

Diversification Opportunities for Citigroup and Newtek Business

0.6

Correlation Coefficient

Citigroup  Newtek Business

Poor diversification

The 3 months correlation between Citigroup and Newtek is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Newtek Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtek Business Services 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 Newtek Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtek Business Services has no effect on the direction of Citigroup i.e., Citigroup and Newtek Business go up and down completely randomly.

Pair Corralation between Citigroup and Newtek Business

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than Newtek Business. However, Citigroup is 1.66 times less risky than Newtek Business. It trades about 0.06 of its potential returns per unit of risk. Newtek Business Services is currently generating about 0.0 per unit of risk. If you would invest  4,739  in Citigroup on October 15, 2024 and sell it today you would earn a total of  2,401  from holding Citigroup or generate 50.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.8%
Values	Daily Returns

Citigroup  vs.  Newtek Business Services

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Newtek Business Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Newtek Business may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Newtek Business

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

The idea behind Citigroup and Newtek Business Services 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.