Correlation Between Citigroup and CND
Can any of the company-specific risk be diversified away by investing in both Citigroup and CND 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 CND into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and CND, you can compare the effects of market volatilities on Citigroup and CND 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 CND. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and CND.
Diversification Opportunities for Citigroup and CND
Very poor diversification
The 3 months correlation between Citigroup and CND is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CND 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 CND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CND has no effect on the direction of Citigroup i.e., Citigroup and CND go up and down completely randomly.
Pair Corralation between Citigroup and CND
Taking into account the 90-day investment horizon Citigroup is expected to generate 4.21 times less return on investment than CND. But when comparing it to its historical volatility, Citigroup is 1.72 times less risky than CND. It trades about 0.11 of its potential returns per unit of risk. CND is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 0.04 in CND on August 30, 2024 and sell it today you would earn a total of 0.03 from holding CND or generate 71.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
Citigroup vs. CND
Performance |
| Timeline |
| Citigroup |
| CND |
Citigroup and CND Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and CND
The main advantage of trading using opposite Citigroup and CND positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, CND 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 CND will offset losses from the drop in CND's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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 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.
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