Correlation Between Citigroup and IShares BRIC

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

By analyzing existing cross correlation between Citigroup and iShares BRIC 50, you can compare the effects of market volatilities on Citigroup and IShares BRIC 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 BRIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and IShares BRIC.

Diversification Opportunities for Citigroup and IShares BRIC

-0.4

Correlation Coefficient

Citigroup  IShares BRIC

Very good diversification

The 3 months correlation between Citigroup and IShares is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iShares BRIC 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BRIC 50 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 BRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BRIC 50 has no effect on the direction of Citigroup i.e., Citigroup and IShares BRIC go up and down completely randomly.

Pair Corralation between Citigroup and IShares BRIC

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.8 times more return on investment than IShares BRIC. However, Citigroup is 1.24 times less risky than IShares BRIC. It trades about 0.1 of its potential returns per unit of risk. iShares BRIC 50 is currently generating about 0.08 per unit of risk. If you would invest  6,203  in Citigroup on September 23, 2024 and sell it today you would earn a total of  716.00  from holding Citigroup or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Citigroup  vs.  iShares BRIC 50

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares BRIC 50

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares BRIC 50 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares BRIC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and IShares BRIC

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

The idea behind Citigroup and iShares BRIC 50 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.