Correlation Between Citigroup and IShares Trust

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

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

Diversification Opportunities for Citigroup and IShares Trust

-0.02

Correlation Coefficient

Citigroup  IShares Trust

Good diversification

The 3 months correlation between Citigroup and IShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Citigroup i.e., Citigroup and IShares Trust go up and down completely randomly.

Pair Corralation between Citigroup and IShares Trust

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.45 times less return on investment than IShares Trust. In addition to that, Citigroup is 20.4 times more volatile than iShares Trust. It trades about 0.01 of its total potential returns per unit of risk. iShares Trust is currently generating about 0.44 per unit of volatility. If you would invest  2,549  in iShares Trust on December 29, 2024 and sell it today you would earn a total of  68.00  from holding iShares Trust or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  iShares Trust

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Trust

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Trust are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, IShares Trust 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 IShares Trust

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

The idea behind Citigroup and iShares Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.