Correlation Between Citigroup and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Citigroup and NVIDIA 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 NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and NVIDIA, you can compare the effects of market volatilities on Citigroup and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and NVIDIA.
Diversification Opportunities for Citigroup and NVIDIA
Very poor diversification
The 3 months correlation between Citigroup and NVIDIA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Citigroup i.e., Citigroup and NVIDIA go up and down completely randomly.
Pair Corralation between Citigroup and NVIDIA
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.96 times more return on investment than NVIDIA. However, Citigroup is 1.05 times less risky than NVIDIA. It trades about 0.19 of its potential returns per unit of risk. NVIDIA is currently generating about 0.05 per unit of risk. If you would invest 6,300 in Citigroup on August 23, 2024 and sell it today you would earn a total of 595.00 from holding Citigroup or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. NVIDIA
Performance |
| Timeline |
| Citigroup |
| NVIDIA |
Citigroup and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and NVIDIA
The main advantage of trading using opposite Citigroup and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Royal Bank of | Citigroup vs. JPMorgan Chase Co |
| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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