Correlation Between Citigroup and IRobot

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

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

Diversification Opportunities for Citigroup and IRobot

-0.82

Correlation Coefficient

Citigroup  IRobot

Pay attention - limited upside

The 3 months correlation between Citigroup and IRobot is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and iRobot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRobot 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 IRobot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRobot has no effect on the direction of Citigroup i.e., Citigroup and IRobot go up and down completely randomly.

Pair Corralation between Citigroup and IRobot

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the IRobot. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 4.04 times less risky than IRobot. The stock trades about -0.06 of its potential returns per unit of risk. The iRobot is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  800.00  in iRobot on February 2, 2024 and sell it today you would earn a total of  56.00  from holding iRobot or generate 7.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Citigroup  vs.  iRobot

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in June 2024.

iRobot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iRobot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Citigroup and IRobot

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

The idea behind Citigroup and iRobot 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.