Correlation Between Citigroup and Newretail
Can any of the company-specific risk be diversified away by investing in both Citigroup and Newretail 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 Newretail into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Newretail Co, you can compare the effects of market volatilities on Citigroup and Newretail 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 Newretail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Newretail.
Diversification Opportunities for Citigroup and Newretail
Poor diversification
The 3 months correlation between Citigroup and Newretail is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Newretail Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newretail 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 Newretail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newretail has no effect on the direction of Citigroup i.e., Citigroup and Newretail go up and down completely randomly.
Pair Corralation between Citigroup and Newretail
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.17 times less return on investment than Newretail. But when comparing it to its historical volatility, Citigroup is 2.68 times less risky than Newretail. It trades about 0.07 of its potential returns per unit of risk. Newretail Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,040 in Newretail Co on August 28, 2024 and sell it today you would earn a total of 475.00 from holding Newretail Co or generate 23.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.77% |
| Values | Daily Returns |
Citigroup vs. Newretail Co
Performance |
| Timeline |
| Citigroup |
| Newretail |
Citigroup and Newretail Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Newretail
The main advantage of trading using opposite Citigroup and Newretail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Newretail 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 Newretail will offset losses from the drop in Newretail's long position.The idea behind Citigroup and Newretail Co 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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