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
Very good diversification
The 3 months correlation between Citigroup and Iberdrola is -0.41. 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 1.28 times more return on investment than Iberdrola. However, Citigroup is 1.28 times more volatile than Iberdrola SA. It trades about 0.08 of its potential returns per unit of risk. Iberdrola SA is currently generating about 0.06 per unit of risk. If you would invest 4,746 in Citigroup on November 2, 2024 and sell it today you would earn a total of 3,474 from holding Citigroup or generate 73.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Citigroup vs. Iberdrola SA
Performance |
| Timeline |
| Citigroup |
| Iberdrola SA |
Citigroup and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
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.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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