Correlation Between Citigroup and Newtopia

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

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

Diversification Opportunities for Citigroup and Newtopia

-0.68

Correlation Coefficient

Citigroup  Newtopia

Excellent diversification

The 3 months correlation between Citigroup and Newtopia is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia 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 Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Citigroup i.e., Citigroup and Newtopia go up and down completely randomly.

Pair Corralation between Citigroup and Newtopia

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.57 times less return on investment than Newtopia. But when comparing it to its historical volatility, Citigroup is 15.3 times less risky than Newtopia. It trades about 0.1 of its potential returns per unit of risk. Newtopia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.20  in Newtopia on September 12, 2024 and sell it today you would lose (4.64) from holding Newtopia or give up 89.23% of portfolio value over 90 days.

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

Citigroup  vs.  Newtopia

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.

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and Newtopia

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

The idea behind Citigroup and Newtopia 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..