Correlation Between Citigroup and Nubian Resources

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

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

Diversification Opportunities for Citigroup and Nubian Resources

0.4

Correlation Coefficient

Citigroup  Nubian Resources

Very weak diversification

The 3 months correlation between Citigroup and Nubian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nubian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nubian Resources 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 Nubian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nubian Resources has no effect on the direction of Citigroup i.e., Citigroup and Nubian Resources go up and down completely randomly.

Pair Corralation between Citigroup and Nubian Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.37 times less return on investment than Nubian Resources. But when comparing it to its historical volatility, Citigroup is 6.84 times less risky than Nubian Resources. It trades about 0.2 of its potential returns per unit of risk. Nubian Resources is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Nubian Resources on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Nubian Resources or generate 40.0% return on investment over 90 days.

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

Citigroup  vs.  Nubian Resources

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Nubian Resources

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nubian Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Nubian Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Nubian Resources

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

The idea behind Citigroup and Nubian Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.