Correlation Between Citigroup and MSCI ACWI

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

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

Diversification Opportunities for Citigroup and MSCI ACWI

0.86

Correlation Coefficient

Citigroup  MSCI ACWI

Very poor diversification

The 3 months correlation between Citigroup and MSCI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and MSCI ACWI exAUCONSUMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSCI ACWI exAUCONSUMER 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 MSCI ACWI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSCI ACWI exAUCONSUMER has no effect on the direction of Citigroup i.e., Citigroup and MSCI ACWI go up and down completely randomly.

Pair Corralation between Citigroup and MSCI ACWI

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.75 times more return on investment than MSCI ACWI. However, Citigroup is 7.75 times more volatile than MSCI ACWI exAUCONSUMER. It trades about 0.33 of its potential returns per unit of risk. MSCI ACWI exAUCONSUMER is currently generating about 0.25 per unit of risk. If you would invest  6,235  in Citigroup on September 4, 2024 and sell it today you would earn a total of  907.00  from holding Citigroup or generate 14.55% return on investment over 90 days.

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

Citigroup  vs.  MSCI ACWI exAUCONSUMER

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

MSCI ACWI exAUCONSUMER

Risk-Adjusted Performance

12 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI ACWI exAUCONSUMER are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, MSCI ACWI is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and MSCI ACWI

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

The idea behind Citigroup and MSCI ACWI exAUCONSUMER 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.