Correlation Between Citigroup and NOW
Can any of the company-specific risk be diversified away by investing in both Citigroup and NOW 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 NOW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and NOW Inc, you can compare the effects of market volatilities on Citigroup and NOW 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 NOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and NOW.
Diversification Opportunities for Citigroup and NOW
Poor diversification
The 3 months correlation between Citigroup and NOW is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NOW Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOW Inc 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 NOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOW Inc has no effect on the direction of Citigroup i.e., Citigroup and NOW go up and down completely randomly.
Pair Corralation between Citigroup and NOW
Taking into account the 90-day investment horizon Citigroup is expected to generate 3.64 times less return on investment than NOW. But when comparing it to its historical volatility, Citigroup is 1.45 times less risky than NOW. It trades about 0.2 of its potential returns per unit of risk. NOW Inc is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 1,040 in NOW Inc on August 30, 2024 and sell it today you would earn a total of 390.00 from holding NOW Inc or generate 37.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Citigroup vs. NOW Inc
Performance |
| Timeline |
| Citigroup |
| NOW Inc |
Citigroup and NOW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and NOW
The main advantage of trading using opposite Citigroup and NOW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, NOW 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 NOW will offset losses from the drop in NOW's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| NOW vs. National Storage Affiliates | NOW vs. Jacquet Metal Service | NOW vs. INFORMATION SVC GRP | NOW vs. ADRIATIC METALS LS 013355 |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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