Correlation Between Citigroup and New Economy

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

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

Diversification Opportunities for Citigroup and New Economy

0.48

Correlation Coefficient

Citigroup  New Economy

Very weak diversification

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

Pair Corralation between Citigroup and New Economy

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.55 times more return on investment than New Economy. However, Citigroup is 1.55 times more volatile than New Economy Fund. It trades about 0.07 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.06 per unit of risk. If you would invest  4,219  in Citigroup on September 21, 2024 and sell it today you would earn a total of  2,623  from holding Citigroup or generate 62.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Citigroup  vs.  New Economy Fund

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

New Economy Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Economy Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Citigroup and New Economy

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

The idea behind Citigroup and New Economy Fund 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.