Correlation Between Citigroup and Iberdrola

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

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

Diversification Opportunities for Citigroup and Iberdrola

-0.65

Correlation Coefficient

Citigroup  Iberdrola

Excellent diversification

The 3 months correlation between Citigroup and Iberdrola is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA 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 Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Citigroup i.e., Citigroup and Iberdrola go up and down completely randomly.

Pair Corralation between Citigroup and Iberdrola

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.4 times more return on investment than Iberdrola. However, Citigroup is 1.4 times more volatile than Iberdrola SA. It trades about 0.1 of its potential returns per unit of risk. Iberdrola SA is currently generating about -0.06 per unit of risk. If you would invest  6,203  in Citigroup on September 22, 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	Weak
Accuracy	96.97%
Values	Daily Returns

Citigroup  vs.  Iberdrola SA

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.

Iberdrola SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iberdrola SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Iberdrola 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 Iberdrola

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

The idea behind Citigroup and Iberdrola SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.