Correlation Between Citigroup and SPDR MSCI

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

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

Diversification Opportunities for Citigroup and SPDR MSCI

-0.11

Correlation Coefficient

Citigroup  SPDR MSCI

Good diversification

The 3 months correlation between Citigroup and SPDR is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Emerging 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of Citigroup i.e., Citigroup and SPDR MSCI go up and down completely randomly.

Pair Corralation between Citigroup and SPDR MSCI

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.02 times more return on investment than SPDR MSCI. However, Citigroup is 2.02 times more volatile than SPDR MSCI Emerging. It trades about 0.11 of its potential returns per unit of risk. SPDR MSCI Emerging is currently generating about -0.01 per unit of risk. If you would invest  6,209  in Citigroup on August 30, 2024 and sell it today you would earn a total of  807.00  from holding Citigroup or generate 13.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  SPDR MSCI Emerging

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

SPDR MSCI Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR MSCI Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and SPDR MSCI

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

The idea behind Citigroup and SPDR MSCI Emerging 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.