Correlation Between Citigroup and Northern High

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

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

Diversification Opportunities for Citigroup and Northern High

-0.23

Correlation Coefficient

Citigroup  Northern High

Very good diversification

The 3 months correlation between Citigroup and Northern is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Northern High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern High Yield 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 Northern High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern High Yield has no effect on the direction of Citigroup i.e., Citigroup and Northern High go up and down completely randomly.

Pair Corralation between Citigroup and Northern High

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Northern High. In addition to that, Citigroup is 8.35 times more volatile than Northern High Yield. It trades about -0.09 of its total potential returns per unit of risk. Northern High Yield is currently generating about -0.38 per unit of volatility. If you would invest  752.00  in Northern High Yield on September 24, 2024 and sell it today you would lose (8.00) from holding Northern High Yield or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Northern High Yield

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Northern High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northern High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Northern High 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 Northern High

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

The idea behind Citigroup and Northern High Yield 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.