Correlation Between Citigroup and Nordic Aqua

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

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

Diversification Opportunities for Citigroup and Nordic Aqua

-0.06

Correlation Coefficient

Citigroup  Nordic Aqua

Good diversification

The 3 months correlation between Citigroup and Nordic is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nordic Aqua Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Aqua Partners 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 Nordic Aqua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Aqua Partners has no effect on the direction of Citigroup i.e., Citigroup and Nordic Aqua go up and down completely randomly.

Pair Corralation between Citigroup and Nordic Aqua

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.79 times less return on investment than Nordic Aqua. But when comparing it to its historical volatility, Citigroup is 1.12 times less risky than Nordic Aqua. It trades about 0.03 of its potential returns per unit of risk. Nordic Aqua Partners is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,400  in Nordic Aqua Partners on December 29, 2024 and sell it today you would earn a total of  1,100  from holding Nordic Aqua Partners or generate 14.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Nordic Aqua Partners

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nordic Aqua Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Aqua Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Nordic Aqua disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Nordic Aqua

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

The idea behind Citigroup and Nordic Aqua Partners 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.