Correlation Between Citigroup and Innovator Growth

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

By analyzing existing cross correlation between Citigroup and Innovator Growth 100 Power, you can compare the effects of market volatilities on Citigroup and Innovator Growth 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 Innovator Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Innovator Growth.

Diversification Opportunities for Citigroup and Innovator Growth

0.74

Correlation Coefficient

Citigroup  Innovator Growth

Poor diversification

The 3 months correlation between Citigroup and Innovator is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Innovator Growth 100 Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator Growth 100 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 Innovator Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator Growth 100 has no effect on the direction of Citigroup i.e., Citigroup and Innovator Growth go up and down completely randomly.

Pair Corralation between Citigroup and Innovator Growth

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Innovator Growth. In addition to that, Citigroup is 2.39 times more volatile than Innovator Growth 100 Power. It trades about -0.18 of its total potential returns per unit of risk. Innovator Growth 100 Power is currently generating about -0.15 per unit of volatility. If you would invest  2,572  in Innovator Growth 100 Power on December 29, 2024 and sell it today you would lose (88.00) from holding Innovator Growth 100 Power or give up 3.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  Innovator Growth 100 Power

Citigroup

Risk-Adjusted Performance

Weak

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Innovator Growth 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator Growth 100 Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Innovator Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Innovator Growth

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

The idea behind Citigroup and Innovator Growth 100 Power 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.