Correlation Between Citigroup and IndexIQ ETF

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

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

Diversification Opportunities for Citigroup and IndexIQ ETF

-0.81

Correlation Coefficient

Citigroup  IndexIQ ETF

Pay attention - limited upside

The 3 months correlation between Citigroup and IndexIQ is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and IndexIQ ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ ETF Trust 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 IndexIQ ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ ETF Trust has no effect on the direction of Citigroup i.e., Citigroup and IndexIQ ETF go up and down completely randomly.

Pair Corralation between Citigroup and IndexIQ ETF

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.49 times more return on investment than IndexIQ ETF. However, Citigroup is 1.49 times more volatile than IndexIQ ETF Trust. It trades about -0.03 of its potential returns per unit of risk. IndexIQ ETF Trust is currently generating about -0.22 per unit of risk. If you would invest  6,984  in Citigroup on September 23, 2024 and sell it today you would lose (65.00) from holding Citigroup or give up 0.93% of portfolio value over 90 days.

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

Citigroup  vs.  IndexIQ ETF Trust

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.

IndexIQ ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Citigroup and IndexIQ ETF

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

The idea behind Citigroup and IndexIQ ETF Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.