Correlation Between Citigroup and ProShares

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

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

Diversification Opportunities for Citigroup and ProShares

0.69

Correlation Coefficient

Citigroup  ProShares

Poor diversification

The 3 months correlation between Citigroup and ProShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ProShares SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Technology 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Technology has no effect on the direction of Citigroup i.e., Citigroup and ProShares go up and down completely randomly.

Pair Corralation between Citigroup and ProShares

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the ProShares. In addition to that, Citigroup is 2.31 times more volatile than ProShares SP Technology. It trades about -0.2 of its total potential returns per unit of risk. ProShares SP Technology is currently generating about -0.11 per unit of volatility. If you would invest  7,802  in ProShares SP Technology on December 5, 2024 and sell it today you would lose (183.00) from holding ProShares SP Technology or give up 2.35% of portfolio value over 90 days.

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

Citigroup  vs.  ProShares SP Technology

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

ProShares SP Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares SP Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ProShares is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and ProShares

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

The idea behind Citigroup and ProShares SP Technology 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.