Correlation Between Citigroup and Invesco Short

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

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

Diversification Opportunities for Citigroup and Invesco Short

-0.26

Correlation Coefficient

Citigroup  Invesco Short

Very good diversification

The 3 months correlation between Citigroup and Invesco is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Invesco Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Short Term 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 Invesco Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Short Term has no effect on the direction of Citigroup i.e., Citigroup and Invesco Short go up and down completely randomly.

Pair Corralation between Citigroup and Invesco Short

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.16 times more return on investment than Invesco Short. However, Citigroup is 10.16 times more volatile than Invesco Short Term. It trades about 0.07 of its potential returns per unit of risk. Invesco Short Term is currently generating about 0.13 per unit of risk. If you would invest  4,219  in Citigroup on September 23, 2024 and sell it today you would earn a total of  2,700  from holding Citigroup or generate 64.0% return on investment over 90 days.

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

Citigroup  vs.  Invesco Short Term

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 uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Short Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Invesco Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Invesco Short

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

The idea behind Citigroup and Invesco Short Term 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.