Correlation Between Citigroup and Invesco Treasury

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

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

Diversification Opportunities for Citigroup and Invesco Treasury

0.74

Correlation Coefficient

Citigroup  Invesco Treasury

Poor diversification

The 3 months correlation between Citigroup and Invesco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Invesco Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Treasury Bond 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 Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Treasury Bond has no effect on the direction of Citigroup i.e., Citigroup and Invesco Treasury go up and down completely randomly.

Pair Corralation between Citigroup and Invesco Treasury

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.05 times more return on investment than Invesco Treasury. However, Citigroup is 3.05 times more volatile than Invesco Treasury Bond. It trades about 0.07 of its potential returns per unit of risk. Invesco Treasury Bond is currently generating about -0.01 per unit of risk. If you would invest  4,308  in Citigroup on September 26, 2024 and sell it today you would earn a total of  2,792  from holding Citigroup or generate 64.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.22%
Values	Daily Returns

Citigroup  vs.  Invesco Treasury Bond

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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.

Invesco Treasury Bond

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Treasury Bond are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Invesco Treasury is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Invesco Treasury

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

The idea behind Citigroup and Invesco Treasury Bond 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.