Correlation Between Citigroup and NASD Unchanged

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

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

Diversification Opportunities for Citigroup and NASD Unchanged

0.07

Correlation Coefficient

Citigroup  NASD Unchanged

Significant diversification

The 3 months correlation between Citigroup and NASD is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NASD Unchanged Stocks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NASD Unchanged Stocks 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 NASD Unchanged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NASD Unchanged Stocks has no effect on the direction of Citigroup i.e., Citigroup and NASD Unchanged go up and down completely randomly.

Pair Corralation between Citigroup and NASD Unchanged

Taking into account the 90-day investment horizon Citigroup is expected to generate 53.46 times less return on investment than NASD Unchanged. But when comparing it to its historical volatility, Citigroup is 16.07 times less risky than NASD Unchanged. It trades about 0.04 of its potential returns per unit of risk. NASD Unchanged Stocks is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  9,200  in NASD Unchanged Stocks on December 20, 2024 and sell it today you would earn a total of  300.00  from holding NASD Unchanged Stocks or generate 3.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  NASD Unchanged Stocks

Pair Trading with Citigroup and NASD Unchanged

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

The idea behind Citigroup and NASD Unchanged Stocks 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.