Correlation Between Citigroup and IShares ESG

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

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

Diversification Opportunities for Citigroup and IShares ESG

0.5

Correlation Coefficient

Citigroup  IShares ESG

Very weak diversification

The 3 months correlation between Citigroup and IShares is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares ESG Advanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ESG Advanced 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 ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ESG Advanced has no effect on the direction of Citigroup i.e., Citigroup and IShares ESG go up and down completely randomly.

Pair Corralation between Citigroup and IShares ESG

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.17 times more return on investment than IShares ESG. However, Citigroup is 2.17 times more volatile than iShares ESG Advanced. It trades about 0.13 of its potential returns per unit of risk. iShares ESG Advanced is currently generating about 0.03 per unit of risk. If you would invest  7,090  in Citigroup on December 2, 2024 and sell it today you would earn a total of  905.00  from holding Citigroup or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  iShares ESG Advanced

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

iShares ESG Advanced

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ESG Advanced are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares ESG is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and IShares ESG

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

The idea behind Citigroup and iShares ESG Advanced 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.