Correlation Between Citigroup and North American
Can any of the company-specific risk be diversified away by investing in both Citigroup and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and North American Financial, you can compare the effects of market volatilities on Citigroup and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and North American.
Diversification Opportunities for Citigroup and North American
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and North is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Citigroup i.e., Citigroup and North American go up and down completely randomly.
Pair Corralation between Citigroup and North American
Taking into account the 90-day investment horizon Citigroup is expected to generate 5.16 times less return on investment than North American. But when comparing it to its historical volatility, Citigroup is 5.96 times less risky than North American. It trades about 0.08 of its potential returns per unit of risk. North American Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 313.00 in North American Financial on August 31, 2024 and sell it today you would earn a total of 229.00 from holding North American Financial or generate 73.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 58.29% |
| Values | Daily Returns |
Citigroup vs. North American Financial
Performance |
| Timeline |
| Citigroup |
| North American Financial |
Citigroup and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and North American
The main advantage of trading using opposite Citigroup and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| North American vs. Blackhawk Growth Corp | North American vs. Guardian Capital Group | North American vs. Flow Capital Corp | North American vs. Princeton Capital |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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