Correlation Between Citigroup and IShares Equity

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

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

Diversification Opportunities for Citigroup and IShares Equity

0.95

Correlation Coefficient

Citigroup  IShares Equity

Almost no diversification

The 3 months correlation between Citigroup and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares Equity Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equity 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 IShares Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equity Enhanced has no effect on the direction of Citigroup i.e., Citigroup and IShares Equity go up and down completely randomly.

Pair Corralation between Citigroup and IShares Equity

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.03 times less return on investment than IShares Equity. In addition to that, Citigroup is 1.75 times more volatile than iShares Equity Enhanced. It trades about 0.07 of its total potential returns per unit of risk. iShares Equity Enhanced is currently generating about 0.12 per unit of volatility. If you would invest  471.00  in iShares Equity Enhanced on September 23, 2024 and sell it today you would earn a total of  58.00  from holding iShares Equity Enhanced or generate 12.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	20.93%
Values	Daily Returns

Citigroup  vs.  iShares Equity Enhanced

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Equity Enhanced

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Equity Enhanced are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather weak technical and fundamental indicators, IShares Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and IShares Equity

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

The idea behind Citigroup and iShares Equity 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.

Check out your portfolio center.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.