Correlation Between Citigroup and SPDR Morgan
Can any of the company-specific risk be diversified away by investing in both Citigroup and SPDR Morgan 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 Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and SPDR Morgan Stanley, you can compare the effects of market volatilities on Citigroup and SPDR Morgan 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 Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and SPDR Morgan.
Diversification Opportunities for Citigroup and SPDR Morgan
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of Citigroup i.e., Citigroup and SPDR Morgan go up and down completely randomly.
Pair Corralation between Citigroup and SPDR Morgan
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.86 times more return on investment than SPDR Morgan. However, Citigroup is 1.86 times more volatile than SPDR Morgan Stanley. It trades about 0.15 of its potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.07 per unit of risk. If you would invest 6,205 in Citigroup on August 30, 2024 and sell it today you would earn a total of 811.00 from holding Citigroup or generate 13.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. SPDR Morgan Stanley
Performance |
| Timeline |
| Citigroup |
| SPDR Morgan Stanley |
Citigroup and SPDR Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and SPDR Morgan
The main advantage of trading using opposite Citigroup and SPDR Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, SPDR Morgan 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 Morgan will offset losses from the drop in SPDR Morgan's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| SPDR Morgan vs. SPDR FactSet Innovative | SPDR Morgan vs. SPDR SP Software | SPDR Morgan vs. SPDR SP Health | SPDR Morgan vs. iShares Expanded Tech |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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