Correlation Between Citigroup and NuShares ETF

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

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

Diversification Opportunities for Citigroup and NuShares ETF

0.21

Correlation Coefficient

Citigroup  NuShares ETF

Modest diversification

The 3 months correlation between Citigroup and NuShares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and NuShares ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuShares ETF Trust 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 NuShares ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuShares ETF Trust has no effect on the direction of Citigroup i.e., Citigroup and NuShares ETF go up and down completely randomly.

Pair Corralation between Citigroup and NuShares ETF

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.82 times more return on investment than NuShares ETF. However, Citigroup is 1.82 times more volatile than NuShares ETF Trust. It trades about 0.04 of its potential returns per unit of risk. NuShares ETF Trust is currently generating about 0.06 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.97% return on investment over 90 days.

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

Citigroup  vs.  NuShares ETF Trust

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.

NuShares ETF Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NuShares ETF Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, NuShares ETF is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and NuShares ETF

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

The idea behind Citigroup and NuShares ETF Trust 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.