Correlation Between Citigroup and NEXE Innovations

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

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

Diversification Opportunities for Citigroup and NEXE Innovations

0.27

Correlation Coefficient

Citigroup  NEXE Innovations

Modest diversification

The 3 months correlation between Citigroup and NEXE is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NEXE Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXE Innovations 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 NEXE Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXE Innovations has no effect on the direction of Citigroup i.e., Citigroup and NEXE Innovations go up and down completely randomly.

Pair Corralation between Citigroup and NEXE Innovations

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.3 times more return on investment than NEXE Innovations. However, Citigroup is 3.29 times less risky than NEXE Innovations. It trades about 0.07 of its potential returns per unit of risk. NEXE Innovations is currently generating about -0.08 per unit of risk. If you would invest  6,903  in Citigroup on October 7, 2024 and sell it today you would earn a total of  197.00  from holding Citigroup or generate 2.85% return on investment over 90 days.

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

Citigroup  vs.  NEXE Innovations

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

NEXE Innovations

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NEXE Innovations are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NEXE Innovations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and NEXE Innovations

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

The idea behind Citigroup and NEXE Innovations 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.