Correlation Between Citigroup and Interactive Brokers

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

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

Diversification Opportunities for Citigroup and Interactive Brokers

0.9

Correlation Coefficient

Citigroup  Interactive Brokers

Almost no diversification

The 3 months correlation between Citigroup and Interactive is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers 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 Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Citigroup i.e., Citigroup and Interactive Brokers go up and down completely randomly.

Pair Corralation between Citigroup and Interactive Brokers

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than Interactive Brokers. However, Citigroup is 1.67 times less risky than Interactive Brokers. It trades about 0.01 of its potential returns per unit of risk. Interactive Brokers Group is currently generating about -0.02 per unit of risk. If you would invest  6,991  in Citigroup on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% 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.  Interactive Brokers Group

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.

Interactive Brokers

Risk-Adjusted Performance

Very Weak

Over the last 90 days Interactive Brokers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Interactive Brokers is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Interactive Brokers

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

The idea behind Citigroup and Interactive Brokers Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.