Correlation Between Citigroup and IShares NAFTRAC

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

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

Diversification Opportunities for Citigroup and IShares NAFTRAC

0.52

Correlation Coefficient

Citigroup  IShares NAFTRAC

Very weak diversification

The 3 months correlation between Citigroup and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares NAFTRAC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares NAFTRAC 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 NAFTRAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares NAFTRAC has no effect on the direction of Citigroup i.e., Citigroup and IShares NAFTRAC go up and down completely randomly.

Pair Corralation between Citigroup and IShares NAFTRAC

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.37 times less return on investment than IShares NAFTRAC. In addition to that, Citigroup is 2.46 times more volatile than iShares NAFTRAC. It trades about 0.02 of its total potential returns per unit of risk. iShares NAFTRAC is currently generating about 0.14 per unit of volatility. If you would invest  4,950  in iShares NAFTRAC on December 25, 2024 and sell it today you would earn a total of  322.00  from holding iShares NAFTRAC or generate 6.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  iShares NAFTRAC

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

iShares NAFTRAC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares NAFTRAC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, IShares NAFTRAC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and IShares NAFTRAC

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

The idea behind Citigroup and iShares NAFTRAC 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.