Correlation Between Citigroup and IShares Edge

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

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

Diversification Opportunities for Citigroup and IShares Edge

-0.64

Correlation Coefficient

Citigroup  IShares Edge

Excellent diversification

The 3 months correlation between Citigroup and IShares is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Citigroup i.e., Citigroup and IShares Edge go up and down completely randomly.

Pair Corralation between Citigroup and IShares Edge

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.95 times more return on investment than IShares Edge. However, Citigroup is 2.95 times more volatile than iShares Edge MSCI. It trades about 0.07 of its potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.04 per unit of risk. If you would invest  4,381  in Citigroup on September 30, 2024 and sell it today you would earn a total of  2,719  from holding Citigroup or generate 62.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.4%
Values	Daily Returns

Citigroup  vs.  iShares Edge MSCI

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

iShares Edge MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, IShares Edge is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and IShares Edge

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

The idea behind Citigroup and iShares Edge MSCI 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.