Correlation Between Citigroup and Xtrackers ESG

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

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

Diversification Opportunities for Citigroup and Xtrackers ESG

0.45

Correlation Coefficient

Citigroup  Xtrackers ESG

Very weak diversification

The 3 months correlation between Citigroup and Xtrackers is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Xtrackers ESG USD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ESG USD 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 Xtrackers ESG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ESG USD has no effect on the direction of Citigroup i.e., Citigroup and Xtrackers ESG go up and down completely randomly.

Pair Corralation between Citigroup and Xtrackers ESG

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.05 times more return on investment than Xtrackers ESG. However, Citigroup is 8.05 times more volatile than Xtrackers ESG USD. It trades about 0.04 of its potential returns per unit of risk. Xtrackers ESG USD is currently generating about 0.14 per unit of risk. If you would invest  6,929  in Citigroup on December 22, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Citigroup  vs.  Xtrackers ESG USD

Citigroup

Risk-Adjusted Performance

Insignificant

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers ESG USD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers ESG USD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Xtrackers ESG is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Xtrackers ESG

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

The idea behind Citigroup and Xtrackers ESG USD 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.