Correlation Between Citigroup and Nordea Bank

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

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

Diversification Opportunities for Citigroup and Nordea Bank

-0.51

Correlation Coefficient

Citigroup  Nordea Bank

Excellent diversification

The 3 months correlation between Citigroup and Nordea is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp 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 Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Citigroup i.e., Citigroup and Nordea Bank go up and down completely randomly.

Pair Corralation between Citigroup and Nordea Bank

Taking into account the 90-day investment horizon Citigroup is expected to generate 46.66 times less return on investment than Nordea Bank. But when comparing it to its historical volatility, Citigroup is 1.38 times less risky than Nordea Bank. It trades about 0.0 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,080  in Nordea Bank Abp on October 15, 2024 and sell it today you would earn a total of  39.00  from holding Nordea Bank Abp or generate 3.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Nordea Bank Abp

Citigroup

Risk-Adjusted Performance

11 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nordea Bank Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordea Bank Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Nordea Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Nordea Bank

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

The idea behind Citigroup and Nordea Bank Abp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.