Correlation Between Natwest Group and Citigroup

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

By analyzing existing cross correlation between Natwest Group PLC and Citigroup, you can compare the effects of market volatilities on Natwest Group and Citigroup 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 Natwest Group with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natwest Group and Citigroup.

Diversification Opportunities for Natwest Group and Citigroup

-0.23

Correlation Coefficient

Natwest Group  Citigroup

Very good diversification

The 3 months correlation between Natwest and Citigroup is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Natwest Group PLC and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Natwest Group 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 Natwest Group PLC are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Natwest Group i.e., Natwest Group and Citigroup go up and down completely randomly.

Pair Corralation between Natwest Group and Citigroup

Considering the 90-day investment horizon Natwest Group PLC is expected to generate 0.77 times more return on investment than Citigroup. However, Natwest Group PLC is 1.3 times less risky than Citigroup. It trades about -0.04 of its potential returns per unit of risk. Citigroup is currently generating about -0.19 per unit of risk. If you would invest  1,108  in Natwest Group PLC on January 7, 2025 and sell it today you would lose (36.00) from holding Natwest Group PLC or give up 3.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Natwest Group PLC  vs.  Citigroup

Natwest Group PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Natwest Group PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Natwest Group reported solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Natwest Group and Citigroup

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

The idea behind Natwest Group PLC and Citigroup 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.