Correlation Between Citigroup and Nestle SA
Can any of the company-specific risk be diversified away by investing in both Citigroup and Nestle 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 Nestle SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Nestle SA, you can compare the effects of market volatilities on Citigroup and Nestle 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 Nestle SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Nestle SA.
Diversification Opportunities for Citigroup and Nestle SA
Excellent diversification
The 3 months correlation between Citigroup and Nestle is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nestle SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nestle 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 Nestle SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nestle SA has no effect on the direction of Citigroup i.e., Citigroup and Nestle SA go up and down completely randomly.
Pair Corralation between Citigroup and Nestle SA
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.22 times more return on investment than Nestle SA. However, Citigroup is 1.22 times more volatile than Nestle SA. It trades about 0.12 of its potential returns per unit of risk. Nestle SA is currently generating about -0.07 per unit of risk. If you would invest 4,583 in Citigroup on January 24, 2024 and sell it today you would earn a total of 1,512 from holding Citigroup or generate 32.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Nestle SA
Performance |
| Timeline |
| Citigroup |
| Nestle SA |
Citigroup and Nestle SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Nestle SA
The main advantage of trading using opposite Citigroup and Nestle SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Nestle 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 Nestle SA will offset losses from the drop in Nestle SA's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Nestle SA vs. Kellanova | Nestle SA vs. Lancaster Colony | Nestle SA vs. The A2 Milk | Nestle SA vs. Artisan Consumer Goods |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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