Correlation Between Citigroup and Nova Royalty

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

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

Diversification Opportunities for Citigroup and Nova Royalty

0.54

Correlation Coefficient

Citigroup  Nova Royalty

Very weak diversification

The 3 months correlation between Citigroup and Nova is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nova Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Royalty Corp 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 Nova Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Royalty Corp has no effect on the direction of Citigroup i.e., Citigroup and Nova Royalty go up and down completely randomly.

Pair Corralation between Citigroup and Nova Royalty

If you would invest  7,250  in Citigroup on October 11, 2024 and sell it today you would earn a total of  76.00  from holding Citigroup or generate 1.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Citigroup  vs.  Nova Royalty Corp

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nova Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nova Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Nova Royalty

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

The idea behind Citigroup and Nova Royalty Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.