Correlation Between Citigroup and Invesco MSCI

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

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

Diversification Opportunities for Citigroup and Invesco MSCI

0.71

Correlation Coefficient

Citigroup  Invesco MSCI

Poor diversification

The 3 months correlation between Citigroup and Invesco is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Invesco MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco MSCI Japan 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 Invesco MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco MSCI Japan has no effect on the direction of Citigroup i.e., Citigroup and Invesco MSCI go up and down completely randomly.

Pair Corralation between Citigroup and Invesco MSCI

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.42 times less return on investment than Invesco MSCI. But when comparing it to its historical volatility, Citigroup is 1.14 times less risky than Invesco MSCI. It trades about 0.18 of its potential returns per unit of risk. Invesco MSCI Japan is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  7,522  in Invesco MSCI Japan on September 17, 2024 and sell it today you would earn a total of  314.00  from holding Invesco MSCI Japan or generate 4.17% return on investment over 90 days.

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

Citigroup  vs.  Invesco MSCI Japan

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

Invesco MSCI Japan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco MSCI Japan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Invesco MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Invesco MSCI

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

The idea behind Citigroup and Invesco MSCI Japan 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.