Correlation Between Citigroup and Nuveen Small

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

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

Diversification Opportunities for Citigroup and Nuveen Small

0.65

Correlation Coefficient

Citigroup  Nuveen Small

Poor diversification

The 3 months correlation between Citigroup and Nuveen is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nuveen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Small Cap 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 Nuveen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Small Cap has no effect on the direction of Citigroup i.e., Citigroup and Nuveen Small go up and down completely randomly.

Pair Corralation between Citigroup and Nuveen Small

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.37 times more return on investment than Nuveen Small. However, Citigroup is 1.37 times more volatile than Nuveen Small Cap. It trades about 0.12 of its potential returns per unit of risk. Nuveen Small Cap is currently generating about 0.04 per unit of risk. If you would invest  6,268  in Citigroup on October 8, 2024 and sell it today you would earn a total of  832.00  from holding Citigroup or generate 13.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Nuveen Small Cap

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nuveen Small Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nuveen Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Nuveen Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Nuveen Small

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

The idea behind Citigroup and Nuveen Small Cap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.