Correlation Between Citigroup and Nio

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

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

Diversification Opportunities for Citigroup and Nio

-0.72

Correlation Coefficient

Citigroup  Nio

Pay attention - limited upside

The 3 months correlation between Citigroup and Nio is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of Citigroup i.e., Citigroup and Nio go up and down completely randomly.

Pair Corralation between Citigroup and Nio

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.35 times more return on investment than Nio. However, Citigroup is 2.86 times less risky than Nio. It trades about 0.09 of its potential returns per unit of risk. Nio Class A is currently generating about -0.02 per unit of risk. If you would invest  3,786  in Citigroup on February 3, 2024 and sell it today you would earn a total of  2,368  from holding Citigroup or generate 62.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Nio Class A

Citigroup

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nio Class A

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nio Class A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Nio may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Citigroup and Nio

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

The idea behind Citigroup and Nio Class A 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..