Correlation Between Citigroup and SPDR Series

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

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

Diversification Opportunities for Citigroup and SPDR Series

0.87

Correlation Coefficient

Citigroup  SPDR Series

Very poor diversification

The 3 months correlation between Citigroup and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SPDR Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Series Trust 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 Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Series Trust has no effect on the direction of Citigroup i.e., Citigroup and SPDR Series go up and down completely randomly.

Pair Corralation between Citigroup and SPDR Series

Given the investment horizon of 90 days Citigroup is expected to generate 1.21 times more return on investment than SPDR Series. However, Citigroup is 1.21 times more volatile than SPDR Series Trust. It trades about 0.22 of its potential returns per unit of risk. SPDR Series Trust is currently generating about 0.11 per unit of risk. If you would invest  109,292  in Citigroup on September 13, 2024 and sell it today you would earn a total of  34,748  from holding Citigroup or generate 31.79% return on investment over 90 days.

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

Citigroup  vs.  SPDR Series Trust

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Citigroup showed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Series Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Series Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SPDR Series showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and SPDR Series

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

The idea behind Citigroup and SPDR Series Trust 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.