Correlation Between Citigroup and SPDR Kensho

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

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

Diversification Opportunities for Citigroup and SPDR Kensho

0.77

Correlation Coefficient

Citigroup  SPDR Kensho

Poor diversification

The 3 months correlation between Citigroup and SPDR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SPDR Kensho Future in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Future 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 SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Future has no effect on the direction of Citigroup i.e., Citigroup and SPDR Kensho go up and down completely randomly.

Pair Corralation between Citigroup and SPDR Kensho

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.39 times more return on investment than SPDR Kensho. However, Citigroup is 1.39 times more volatile than SPDR Kensho Future. It trades about 0.04 of its potential returns per unit of risk. SPDR Kensho Future is currently generating about -0.01 per unit of risk. If you would invest  7,051  in Citigroup on December 27, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.87% return on investment over 90 days.

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

Citigroup  vs.  SPDR Kensho Future

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Kensho Future

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Future has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPDR Kensho is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and SPDR Kensho

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

The idea behind Citigroup and SPDR Kensho Future 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.