Correlation Between Citigroup and Newpark Resources
Can any of the company-specific risk be diversified away by investing in both Citigroup and Newpark Resources 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 Newpark Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Newpark Resources, you can compare the effects of market volatilities on Citigroup and Newpark Resources 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 Newpark Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Newpark Resources.
Diversification Opportunities for Citigroup and Newpark Resources
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Newpark is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Newpark Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newpark Resources 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 Newpark Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newpark Resources has no effect on the direction of Citigroup i.e., Citigroup and Newpark Resources go up and down completely randomly.
Pair Corralation between Citigroup and Newpark Resources
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.23 times less return on investment than Newpark Resources. But when comparing it to its historical volatility, Citigroup is 2.88 times less risky than Newpark Resources. It trades about 0.19 of its potential returns per unit of risk. Newpark Resources is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 715.00 in Newpark Resources on September 18, 2024 and sell it today you would earn a total of 47.00 from holding Newpark Resources or generate 6.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Newpark Resources
Performance |
| Timeline |
| Citigroup |
| Newpark Resources |
Citigroup and Newpark Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Newpark Resources
The main advantage of trading using opposite Citigroup and Newpark Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Newpark Resources 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 Newpark Resources will offset losses from the drop in Newpark Resources' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Newpark Resources vs. Now Inc | Newpark Resources vs. Enerflex | Newpark Resources vs. Bristow Group | Newpark Resources vs. Forum Energy Technologies |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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