Correlation Between Citigroup and NCR PLC
Can any of the company-specific risk be diversified away by investing in both Citigroup and NCR PLC 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 NCR PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and NCR PLC, you can compare the effects of market volatilities on Citigroup and NCR PLC 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 NCR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and NCR PLC.
Diversification Opportunities for Citigroup and NCR PLC
Poor diversification
The 3 months correlation between Citigroup and NCR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NCR PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NCR PLC 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 NCR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NCR PLC has no effect on the direction of Citigroup i.e., Citigroup and NCR PLC go up and down completely randomly.
Pair Corralation between Citigroup and NCR PLC
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than NCR PLC. However, Citigroup is 1.65 times less risky than NCR PLC. It trades about 0.22 of its potential returns per unit of risk. NCR PLC is currently generating about 0.09 per unit of risk. If you would invest 6,129 in Citigroup on September 19, 2024 and sell it today you would earn a total of 988.50 from holding Citigroup or generate 16.13% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Citigroup vs. NCR PLC
Performance |
Timeline |
Citigroup |
NCR PLC |
Citigroup and NCR PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and NCR PLC
The main advantage of trading using opposite Citigroup and NCR PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, NCR PLC 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 NCR PLC will offset losses from the drop in NCR PLC's long position.Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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