Correlation Between Citigroup and Xtrackers MSCI

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

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

Diversification Opportunities for Citigroup and Xtrackers MSCI

0.71

Correlation Coefficient

Citigroup  Xtrackers MSCI

Poor diversification

The 3 months correlation between Citigroup and Xtrackers is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Xtrackers MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI has no effect on the direction of Citigroup i.e., Citigroup and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Citigroup and Xtrackers MSCI

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.06 times less return on investment than Xtrackers MSCI. In addition to that, Citigroup is 1.64 times more volatile than Xtrackers MSCI. It trades about 0.02 of its total potential returns per unit of risk. Xtrackers MSCI is currently generating about 0.16 per unit of volatility. If you would invest  3,247  in Xtrackers MSCI on September 26, 2024 and sell it today you would earn a total of  75.00  from holding Xtrackers MSCI or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Citigroup  vs.  Xtrackers MSCI

Citigroup

Risk-Adjusted Performance

10 of 100

Good

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xtrackers MSCI is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Xtrackers MSCI

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

The idea behind Citigroup and Xtrackers MSCI 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.