Correlation Between Citigroup and IShares IV

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

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

Diversification Opportunities for Citigroup and IShares IV

0.68

Correlation Coefficient

Citigroup  IShares IV

Poor diversification

The 3 months correlation between Citigroup and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares IV Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares IV Public 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 IV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares IV Public has no effect on the direction of Citigroup i.e., Citigroup and IShares IV go up and down completely randomly.

Pair Corralation between Citigroup and IShares IV

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.33 times more return on investment than IShares IV. However, Citigroup is 2.33 times more volatile than iShares IV Public. It trades about -0.03 of its potential returns per unit of risk. iShares IV Public is currently generating about -0.24 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 IV Public

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 IV Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares IV Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IV 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 IV

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

The idea behind Citigroup and iShares IV Public 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.