Correlation Between Natwest Group and Citigroup

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

By analyzing existing cross correlation between Natwest Group PLC and Citigroup, you can compare the effects of market volatilities on Natwest Group and Citigroup 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 Natwest Group with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natwest Group and Citigroup.

Diversification Opportunities for Natwest Group and Citigroup

-0.07

Correlation Coefficient

Natwest Group  Citigroup

Good diversification

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

Pair Corralation between Natwest Group and Citigroup

Considering the 90-day investment horizon Natwest Group PLC is expected to generate 1.13 times more return on investment than Citigroup. However, Natwest Group is 1.13 times more volatile than Citigroup. It trades about 0.15 of its potential returns per unit of risk. Citigroup is currently generating about 0.01 per unit of risk. If you would invest  984.00  in Natwest Group PLC on December 28, 2024 and sell it today you would earn a total of  212.00  from holding Natwest Group PLC or generate 21.54% return on investment over 90 days.

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

Natwest Group PLC  vs.  Citigroup

Natwest Group PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Natwest Group PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Natwest Group reported solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Pair Trading with Natwest Group and Citigroup

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

The idea behind Natwest Group PLC and Citigroup 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.