Correlation Between Citigroup and KODEX KRX

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

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

Diversification Opportunities for Citigroup and KODEX KRX

-0.88

Correlation Coefficient

Citigroup  KODEX KRX

Pay attention - limited upside

The 3 months correlation between Citigroup and KODEX is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and KODEX KRX Climate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KODEX KRX Climate 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 KODEX KRX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KODEX KRX Climate has no effect on the direction of Citigroup i.e., Citigroup and KODEX KRX go up and down completely randomly.

Pair Corralation between Citigroup and KODEX KRX

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.15 times less return on investment than KODEX KRX. But when comparing it to its historical volatility, Citigroup is 1.05 times less risky than KODEX KRX. It trades about 0.07 of its potential returns per unit of risk. KODEX KRX Climate is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  905,500  in KODEX KRX Climate on October 12, 2024 and sell it today you would earn a total of  35,500  from holding KODEX KRX Climate or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  KODEX KRX Climate

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

KODEX KRX Climate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KODEX KRX Climate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Citigroup and KODEX KRX

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

The idea behind Citigroup and KODEX KRX Climate 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.