Correlation Between Citigroup and New Perspective
Can any of the company-specific risk be diversified away by investing in both Citigroup and New Perspective 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 New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and New Perspective Fund, you can compare the effects of market volatilities on Citigroup and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and New Perspective.
Diversification Opportunities for Citigroup and New Perspective
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and New is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Citigroup i.e., Citigroup and New Perspective go up and down completely randomly.
Pair Corralation between Citigroup and New Perspective
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.12 times more return on investment than New Perspective. However, Citigroup is 2.12 times more volatile than New Perspective Fund. It trades about 0.12 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.11 per unit of risk. If you would invest 4,325 in Citigroup on August 24, 2024 and sell it today you would earn a total of 2,690 from holding Citigroup or generate 62.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. New Perspective Fund
Performance |
| Timeline |
| Citigroup |
| New Perspective |
Citigroup and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and New Perspective
The main advantage of trading using opposite Citigroup and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| New Perspective vs. Washington Mutual Investors | New Perspective vs. American Balanced Fund | New Perspective vs. New World Fund | New Perspective vs. Europacific Growth Fund |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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