Correlation Between Citigroup and Wisdom Tree

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

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

Diversification Opportunities for Citigroup and Wisdom Tree

0.91

Correlation Coefficient

Citigroup  Wisdom Tree

Almost no diversification

The 3 months correlation between Citigroup and Wisdom is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Wisdom Tree Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdom Tree Bitcoin 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 Wisdom Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdom Tree Bitcoin has no effect on the direction of Citigroup i.e., Citigroup and Wisdom Tree go up and down completely randomly.

Pair Corralation between Citigroup and Wisdom Tree

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.38 times less return on investment than Wisdom Tree. But when comparing it to its historical volatility, Citigroup is 1.71 times less risky than Wisdom Tree. It trades about 0.13 of its potential returns per unit of risk. Wisdom Tree Bitcoin is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  6,154  in Wisdom Tree Bitcoin on September 2, 2024 and sell it today you would earn a total of  4,149  from holding Wisdom Tree Bitcoin or generate 67.42% return on investment over 90 days.

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

Citigroup  vs.  Wisdom Tree Bitcoin

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Wisdom Tree Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wisdom Tree Bitcoin are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Wisdom Tree showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Wisdom Tree

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

The idea behind Citigroup and Wisdom Tree Bitcoin 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .