Correlation Between Citigroup and Nestlé SA

Can any of the company-specific risk be diversified away by investing in both Citigroup and Nestlé SA 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 Nestlé SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Nestl SA, you can compare the effects of market volatilities on Citigroup and Nestlé SA 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 Nestlé SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Nestlé SA.

Diversification Opportunities for Citigroup and Nestlé SA

-0.74

Correlation Coefficient

Citigroup  Nestlé SA

Pay attention - limited upside

The 3 months correlation between Citigroup and Nestlé is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nestl SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestlé SA 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 Nestlé SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestlé SA has no effect on the direction of Citigroup i.e., Citigroup and Nestlé SA go up and down completely randomly.

Pair Corralation between Citigroup and Nestlé SA

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times more return on investment than Nestlé SA. However, Citigroup is 1.36 times more volatile than Nestl SA. It trades about 0.39 of its potential returns per unit of risk. Nestl SA is currently generating about -0.1 per unit of risk. If you would invest  6,789  in Citigroup on April 25, 2025 and sell it today you would earn a total of  2,810  from holding Citigroup or generate 41.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Nestl SA

Citigroup

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nestlé SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nestl SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and Nestlé SA

The main advantage of trading using opposite Citigroup and Nestlé SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Nestlé SA 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 Nestlé SA will offset losses from the drop in Nestlé SA's long position.

The idea behind Citigroup and Nestl SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.