Correlation Between Citigroup and Invesco PHLX

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

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

Diversification Opportunities for Citigroup and Invesco PHLX

-0.36

Correlation Coefficient

Citigroup  Invesco PHLX

Very good diversification

The 3 months correlation between Citigroup and Invesco is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Invesco PHLX Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco PHLX Semicon 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 PHLX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco PHLX Semicon has no effect on the direction of Citigroup i.e., Citigroup and Invesco PHLX go up and down completely randomly.

Pair Corralation between Citigroup and Invesco PHLX

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.41 times less return on investment than Invesco PHLX. But when comparing it to its historical volatility, Citigroup is 1.24 times less risky than Invesco PHLX. It trades about 0.07 of its potential returns per unit of risk. Invesco PHLX Semiconductor is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,100  in Invesco PHLX Semiconductor on October 10, 2024 and sell it today you would earn a total of  2,005  from holding Invesco PHLX Semiconductor or generate 95.48% return on investment over 90 days.

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

Citigroup  vs.  Invesco PHLX Semiconductor

Citigroup

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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 PHLX Semicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco PHLX Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Invesco PHLX is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Citigroup and Invesco PHLX

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

The idea behind Citigroup and Invesco PHLX Semiconductor 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.