Correlation Between Citigroup and IShares SP

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

By analyzing existing cross correlation between Citigroup and iShares SP 100, you can compare the effects of market volatilities on Citigroup and IShares SP 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 IShares SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and IShares SP.

Diversification Opportunities for Citigroup and IShares SP

0.74

Correlation Coefficient

Citigroup  IShares SP

Poor diversification

The 3 months correlation between Citigroup and IShares is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares SP 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 100 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 100 has no effect on the direction of Citigroup i.e., Citigroup and IShares SP go up and down completely randomly.

Pair Corralation between Citigroup and IShares SP

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.9 times more return on investment than IShares SP. However, Citigroup is 1.9 times more volatile than iShares SP 100. It trades about -0.03 of its potential returns per unit of risk. iShares SP 100 is currently generating about -0.12 per unit of risk. If you would invest  6,346  in Citigroup on January 29, 2024 and sell it today you would lose (80.00) from holding Citigroup or give up 1.26% of portfolio value over 90 days.

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

Citigroup  vs.  iShares SP 100

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

iShares SP 100

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 100 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, IShares SP is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and IShares SP

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

The idea behind Citigroup and iShares SP 100 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.