Correlation Between Citigroup and NewFunds TRACI

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

By analyzing existing cross correlation between Citigroup and NewFunds TRACI 3, you can compare the effects of market volatilities on Citigroup and NewFunds TRACI 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 NewFunds TRACI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and NewFunds TRACI.

Diversification Opportunities for Citigroup and NewFunds TRACI

0.72

Correlation Coefficient

Citigroup  NewFunds TRACI

Poor diversification

The 3 months correlation between Citigroup and NewFunds is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NewFunds TRACI 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds TRACI 3 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 NewFunds TRACI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds TRACI 3 has no effect on the direction of Citigroup i.e., Citigroup and NewFunds TRACI go up and down completely randomly.

Pair Corralation between Citigroup and NewFunds TRACI

Taking into account the 90-day investment horizon Citigroup is expected to generate 31.36 times more return on investment than NewFunds TRACI. However, Citigroup is 31.36 times more volatile than NewFunds TRACI 3. It trades about 0.07 of its potential returns per unit of risk. NewFunds TRACI 3 is currently generating about 0.75 per unit of risk. If you would invest  7,186  in Citigroup on October 10, 2024 and sell it today you would earn a total of  140.00  from holding Citigroup or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Citigroup  vs.  NewFunds TRACI 3

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

NewFunds TRACI 3

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NewFunds TRACI 3 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NewFunds TRACI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and NewFunds TRACI

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

The idea behind Citigroup and NewFunds TRACI 3 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.