Correlation Between Citigroup and Flying Nickel

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

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

Diversification Opportunities for Citigroup and Flying Nickel

0.04

Correlation Coefficient

Citigroup  Flying Nickel

Significant diversification

The 3 months correlation between Citigroup and Flying is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Flying Nickel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flying Nickel Mining 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 Flying Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flying Nickel Mining has no effect on the direction of Citigroup i.e., Citigroup and Flying Nickel go up and down completely randomly.

Pair Corralation between Citigroup and Flying Nickel

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.84 times less return on investment than Flying Nickel. But when comparing it to its historical volatility, Citigroup is 9.0 times less risky than Flying Nickel. It trades about 0.21 of its potential returns per unit of risk. Flying Nickel Mining is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.77  in Flying Nickel Mining on September 12, 2024 and sell it today you would lose (0.50) from holding Flying Nickel Mining or give up 13.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Flying Nickel Mining

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Flying Nickel Mining

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flying Nickel Mining are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Flying Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Flying Nickel

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

The idea behind Citigroup and Flying Nickel Mining 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.