Correlation Between Citigroup and Invesco DB

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

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

Diversification Opportunities for Citigroup and Invesco DB

0.34

Correlation Coefficient

Citigroup  Invesco DB

Weak diversification

The 3 months correlation between Citigroup and Invesco is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Invesco DB Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Energy 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 Invesco DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Energy has no effect on the direction of Citigroup i.e., Citigroup and Invesco DB go up and down completely randomly.

Pair Corralation between Citigroup and Invesco DB

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.82 times more return on investment than Invesco DB. However, Citigroup is 1.82 times more volatile than Invesco DB Energy. It trades about 0.33 of its potential returns per unit of risk. Invesco DB Energy is currently generating about -0.06 per unit of risk. If you would invest  6,235  in Citigroup on September 5, 2024 and sell it today you would earn a total of  907.00  from holding Citigroup or generate 14.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Invesco DB Energy

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

Invesco DB Energy

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Invesco DB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Invesco DB

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

The idea behind Citigroup and Invesco DB Energy 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.