Correlation Between Citigroup and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Citigroup and SPDR SP 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 SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and SPDR SP Bank, you can compare the effects of market volatilities on Citigroup and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and SPDR SP.
Diversification Opportunities for Citigroup and SPDR SP
Almost no diversification
The 3 months correlation between Citigroup and SPDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SPDR SP Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Bank 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Bank has no effect on the direction of Citigroup i.e., Citigroup and SPDR SP go up and down completely randomly.
Pair Corralation between Citigroup and SPDR SP
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.31 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Citigroup is 1.39 times less risky than SPDR SP. It trades about 0.21 of its potential returns per unit of risk. SPDR SP Bank is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5,525 in SPDR SP Bank on August 28, 2024 and sell it today you would earn a total of 691.00 from holding SPDR SP Bank or generate 12.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. SPDR SP Bank
Performance |
| Timeline |
| Citigroup |
| SPDR SP Bank |
Citigroup and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and SPDR SP
The main advantage of trading using opposite Citigroup and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.The idea behind Citigroup and SPDR SP Bank 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.| SPDR SP vs. SPDR SP Regional | SPDR SP vs. SPDR SP Insurance | SPDR SP vs. SPDR SP Retail | SPDR SP vs. SPDR SP Homebuilders |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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