Correlation Between Citigroup and NewWave USD

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

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

Diversification Opportunities for Citigroup and NewWave USD

0.49

Correlation Coefficient

Citigroup  NewWave USD

Very weak diversification

The 3 months correlation between Citigroup and NewWave is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NewWave USD Currency in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewWave USD Currency 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 NewWave USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewWave USD Currency has no effect on the direction of Citigroup i.e., Citigroup and NewWave USD go up and down completely randomly.

Pair Corralation between Citigroup and NewWave USD

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.3 times more return on investment than NewWave USD. However, Citigroup is 2.3 times more volatile than NewWave USD Currency. It trades about 0.25 of its potential returns per unit of risk. NewWave USD Currency is currently generating about 0.11 per unit of risk. If you would invest  6,245  in Citigroup on October 24, 2024 and sell it today you would earn a total of  1,924  from holding Citigroup or generate 30.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  NewWave USD Currency

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

NewWave USD Currency

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewWave USD Currency are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NewWave USD is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and NewWave USD

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

The idea behind Citigroup and NewWave USD Currency 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.