Correlation Between Citigroup and Invesco Euro

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

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

Diversification Opportunities for Citigroup and Invesco Euro

0.61

Correlation Coefficient

Citigroup  Invesco Euro

Poor 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 Euro Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Euro Corporate 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 Euro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Euro Corporate has no effect on the direction of Citigroup i.e., Citigroup and Invesco Euro go up and down completely randomly.

Pair Corralation between Citigroup and Invesco Euro

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.51 times more return on investment than Invesco Euro. However, Citigroup is 7.51 times more volatile than Invesco Euro Corporate. It trades about 0.04 of its potential returns per unit of risk. Invesco Euro Corporate is currently generating about -0.04 per unit of risk. If you would invest  6,929  in Citigroup on December 22, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

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

Citigroup  vs.  Invesco Euro Corporate

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Euro Corporate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Euro Corporate has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Invesco Euro is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Invesco Euro

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

The idea behind Citigroup and Invesco Euro Corporate 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.