Correlation Between Citigroup and IShares JP

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

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

Diversification Opportunities for Citigroup and IShares JP

0.45

Correlation Coefficient

Citigroup  IShares JP

Very weak diversification

The 3 months correlation between Citigroup and IShares is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Citigroup i.e., Citigroup and IShares JP go up and down completely randomly.

Pair Corralation between Citigroup and IShares JP

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.91 times more return on investment than IShares JP. However, Citigroup is 3.91 times more volatile than iShares JP Morgan. It trades about 0.13 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.06 per unit of risk. If you would invest  7,093  in Citigroup on December 3, 2024 and sell it today you would earn a total of  902.00  from holding Citigroup or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Citigroup  vs.  iShares JP Morgan

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

iShares JP Morgan

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares JP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and IShares JP

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

The idea behind Citigroup and iShares JP Morgan 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.