Correlation Between Citigroup and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Citigroup and Niagara Mohawk 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 Niagara Mohawk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Niagara Mohawk Power, you can compare the effects of market volatilities on Citigroup and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Niagara Mohawk.
Diversification Opportunities for Citigroup and Niagara Mohawk
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Niagara is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Citigroup i.e., Citigroup and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Citigroup and Niagara Mohawk
Taking into account the 90-day investment horizon Citigroup is expected to generate 3.3 times more return on investment than Niagara Mohawk. However, Citigroup is 3.3 times more volatile than Niagara Mohawk Power. It trades about 0.26 of its potential returns per unit of risk. Niagara Mohawk Power is currently generating about -0.24 per unit of risk. If you would invest 6,361 in Citigroup on September 1, 2024 and sell it today you would earn a total of 726.00 from holding Citigroup or generate 11.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Niagara Mohawk Power
Performance |
| Timeline |
| Citigroup |
| Niagara Mohawk Power |
Citigroup and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Niagara Mohawk
The main advantage of trading using opposite Citigroup and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Niagara Mohawk 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 Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Niagara Mohawk vs. Asure Software | Niagara Mohawk vs. Skechers USA | Niagara Mohawk vs. Under Armour C | Niagara Mohawk vs. Western Digital |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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