Correlation Between Citigroup and Nike

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

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

Diversification Opportunities for Citigroup and Nike

-0.18

Correlation Coefficient

Citigroup  Nike

Good diversification

The 3 months correlation between Citigroup and Nike is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Citigroup i.e., Citigroup and Nike go up and down completely randomly.

Pair Corralation between Citigroup and Nike

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.16 times more return on investment than Nike. However, Citigroup is 1.16 times more volatile than Nike Inc. It trades about 0.16 of its potential returns per unit of risk. Nike Inc is currently generating about 0.03 per unit of risk. If you would invest  5,937  in Citigroup on September 18, 2024 and sell it today you would earn a total of  1,212  from holding Citigroup or generate 20.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Citigroup  vs.  Nike Inc

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Nike Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Nike is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Nike

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

The idea behind Citigroup and Nike Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.