Correlation Between Citigroup and IShares MSCI

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

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

Diversification Opportunities for Citigroup and IShares MSCI

0.94

Correlation Coefficient

Citigroup  IShares MSCI

Almost no diversification

The 3 months correlation between Citigroup and IShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Citigroup i.e., Citigroup and IShares MSCI go up and down completely randomly.

Pair Corralation between Citigroup and IShares MSCI

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the IShares MSCI. In addition to that, Citigroup is 1.32 times more volatile than iShares MSCI USA. It trades about -0.09 of its total potential returns per unit of risk. iShares MSCI USA is currently generating about -0.06 per unit of volatility. If you would invest  12,478  in iShares MSCI USA on September 25, 2024 and sell it today you would lose (138.00) from holding iShares MSCI USA or give up 1.11% of portfolio value over 90 days.

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

Citigroup  vs.  iShares MSCI USA

Citigroup

Risk-Adjusted Performance

10 of 100

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

iShares MSCI USA

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, IShares MSCI 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 IShares MSCI

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

The idea behind Citigroup and iShares MSCI USA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.