Correlation Between Citigroup and WisdomTree Yield

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

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

Diversification Opportunities for Citigroup and WisdomTree Yield

0.58

Correlation Coefficient

Citigroup  WisdomTree Yield

Very weak diversification

The 3 months correlation between Citigroup and WisdomTree is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WisdomTree Yield Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Yield Enhanced 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 WisdomTree Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Yield Enhanced has no effect on the direction of Citigroup i.e., Citigroup and WisdomTree Yield go up and down completely randomly.

Pair Corralation between Citigroup and WisdomTree Yield

Taking into account the 90-day investment horizon Citigroup is expected to generate 14.22 times more return on investment than WisdomTree Yield. However, Citigroup is 14.22 times more volatile than WisdomTree Yield Enhanced. It trades about 0.22 of its potential returns per unit of risk. WisdomTree Yield Enhanced is currently generating about 0.08 per unit of risk. If you would invest  6,300  in Citigroup on October 22, 2024 and sell it today you would earn a total of  1,699  from holding Citigroup or generate 26.97% return on investment over 90 days.

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

Citigroup  vs.  WisdomTree Yield Enhanced

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) 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.

WisdomTree Yield Enhanced

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Yield Enhanced are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, WisdomTree Yield 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 WisdomTree Yield

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

The idea behind Citigroup and WisdomTree Yield Enhanced 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.