Correlation Between Citigroup and IndexIQ

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

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

Diversification Opportunities for Citigroup and IndexIQ

0.78

Correlation Coefficient

Citigroup  IndexIQ

Poor diversification

The 3 months correlation between Citigroup and IndexIQ is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of Citigroup i.e., Citigroup and IndexIQ go up and down completely randomly.

Pair Corralation between Citigroup and IndexIQ

Taking into account the 90-day investment horizon Citigroup is expected to generate 4.22 times more return on investment than IndexIQ. However, Citigroup is 4.22 times more volatile than IndexIQ. It trades about 0.07 of its potential returns per unit of risk. IndexIQ is currently generating about 0.11 per unit of risk. If you would invest  4,162  in Citigroup on September 19, 2024 and sell it today you would earn a total of  2,950  from holding Citigroup or generate 70.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	28.69%
Values	Daily Returns

Citigroup  vs.  IndexIQ

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IndexIQ is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and IndexIQ

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

The idea behind Citigroup and IndexIQ 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.