Correlation Between Citigroup and Sp 500

Can any of the company-specific risk be diversified away by investing in both Citigroup and Sp 500 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 Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Sp 500 Index, you can compare the effects of market volatilities on Citigroup and Sp 500 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 Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Sp 500.

Diversification Opportunities for Citigroup and Sp 500

0.95

Correlation Coefficient

Citigroup  Sp 500

Almost no diversification

The 3 months correlation between Citigroup and USSPX is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index 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 Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Citigroup i.e., Citigroup and Sp 500 go up and down completely randomly.

Pair Corralation between Citigroup and Sp 500

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.85 times more return on investment than Sp 500. However, Citigroup is 2.85 times more volatile than Sp 500 Index. It trades about 0.21 of its potential returns per unit of risk. Sp 500 Index is currently generating about 0.2 per unit of risk. If you would invest  5,683  in Citigroup on September 12, 2024 and sell it today you would earn a total of  1,567  from holding Citigroup or generate 27.57% return on investment over 90 days.

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

Citigroup  vs.  Sp 500 Index

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Sp 500 Index

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sp 500 Index are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sp 500 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Sp 500

The main advantage of trading using opposite Citigroup and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.

The idea behind Citigroup and Sp 500 Index 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.