Correlation Between Citigroup and NOVATECH

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

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

Diversification Opportunities for Citigroup and NOVATECH

0.87

Correlation Coefficient

Citigroup  NOVATECH

Very poor diversification

The 3 months correlation between Citigroup and NOVATECH is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NOVATECH Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVATECH 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 NOVATECH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVATECH has no effect on the direction of Citigroup i.e., Citigroup and NOVATECH go up and down completely randomly.

Pair Corralation between Citigroup and NOVATECH

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.18 times less return on investment than NOVATECH. But when comparing it to its historical volatility, Citigroup is 1.59 times less risky than NOVATECH. It trades about 0.03 of its potential returns per unit of risk. NOVATECH Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,382,285  in NOVATECH Co on December 24, 2024 and sell it today you would earn a total of  53,715  from holding NOVATECH Co or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.44%
Values	Daily Returns

Citigroup  vs.  NOVATECH Co

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

NOVATECH

Risk-Adjusted Performance

Weak

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

Pair Trading with Citigroup and NOVATECH

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

The idea behind Citigroup and NOVATECH Co 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.