Correlation Between Citigroup and NAV

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

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

Diversification Opportunities for Citigroup and NAV

0.82

Correlation Coefficient

Citigroup  NAV

Very poor diversification

The 3 months correlation between Citigroup and NAV is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NAV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAV 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 NAV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAV has no effect on the direction of Citigroup i.e., Citigroup and NAV go up and down completely randomly.

Pair Corralation between Citigroup and NAV

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.22 times less return on investment than NAV. But when comparing it to its historical volatility, Citigroup is 3.68 times less risky than NAV. It trades about 0.03 of its potential returns per unit of risk. NAV is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2.62  in NAV on December 28, 2024 and sell it today you would lose (0.18) from holding NAV or give up 6.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  NAV

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

NAV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NAV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NAV may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and NAV

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

The idea behind Citigroup and NAV 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.