Correlation Between Citigroup and Invesco Global

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

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

Diversification Opportunities for Citigroup and Invesco Global

-0.61

Correlation Coefficient

Citigroup  Invesco Global

Excellent diversification

The 3 months correlation between Citigroup and Invesco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Invesco Global Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Global Health 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Global Health has no effect on the direction of Citigroup i.e., Citigroup and Invesco Global go up and down completely randomly.

Pair Corralation between Citigroup and Invesco Global

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.7 times more return on investment than Invesco Global. However, Citigroup is 2.7 times more volatile than Invesco Global Health. It trades about 0.4 of its potential returns per unit of risk. Invesco Global Health is currently generating about 0.15 per unit of risk. If you would invest  6,977  in Citigroup on October 22, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Citigroup  vs.  Invesco Global Health

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) 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 Global Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Global Health has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Citigroup and Invesco Global

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

The idea behind Citigroup and Invesco Global Health 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.