Correlation Between Citigroup and SSgA SPDR

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

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

Diversification Opportunities for Citigroup and SSgA SPDR

0.79

Correlation Coefficient

Citigroup  SSgA SPDR

Poor diversification

The 3 months correlation between Citigroup and SSgA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Citigroup i.e., Citigroup and SSgA SPDR go up and down completely randomly.

Pair Corralation between Citigroup and SSgA SPDR

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.42 times more return on investment than SSgA SPDR. However, Citigroup is 1.42 times more volatile than SSgA SPDR ETFs. It trades about 0.15 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.0 per unit of risk. If you would invest  6,393  in Citigroup on September 30, 2024 and sell it today you would earn a total of  707.00  from holding Citigroup or generate 11.06% return on investment over 90 days.

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

Citigroup  vs.  SSgA SPDR ETFs

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

SSgA SPDR ETFs

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and SSgA SPDR

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

The idea behind Citigroup and SSgA SPDR ETFs 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.