Correlation Between Citigroup and IndexIQ Active

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

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

Diversification Opportunities for Citigroup and IndexIQ Active

0.08

Correlation Coefficient

Citigroup  IndexIQ Active

Significant diversification

The 3 months correlation between Citigroup and IndexIQ is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and IndexIQ Active ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ Active ETF 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 IndexIQ Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ Active ETF has no effect on the direction of Citigroup i.e., Citigroup and IndexIQ Active go up and down completely randomly.

Pair Corralation between Citigroup and IndexIQ Active

Taking into account the 90-day investment horizon Citigroup is expected to generate 9.06 times more return on investment than IndexIQ Active. However, Citigroup is 9.06 times more volatile than IndexIQ Active ETF. It trades about 0.08 of its potential returns per unit of risk. IndexIQ Active ETF is currently generating about 0.09 per unit of risk. If you would invest  4,091  in Citigroup on September 16, 2024 and sell it today you would earn a total of  3,010  from holding Citigroup or generate 73.58% return on investment over 90 days.

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

Citigroup  vs.  IndexIQ Active ETF

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

IndexIQ Active ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ Active ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, IndexIQ Active is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and IndexIQ Active

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

The idea behind Citigroup and IndexIQ Active ETF 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.