Correlation Between Xtrackers LevDAX and Citigroup

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

By analyzing existing cross correlation between Xtrackers LevDAX and Citigroup, you can compare the effects of market volatilities on Xtrackers LevDAX and Citigroup 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 Xtrackers LevDAX with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and Citigroup.

Diversification Opportunities for Xtrackers LevDAX and Citigroup

0.7

Correlation Coefficient

Xtrackers LevDAX  Citigroup

Poor diversification

The 3 months correlation between Xtrackers and Citigroup is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Xtrackers LevDAX 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 Xtrackers LevDAX are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and Citigroup go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and Citigroup

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.77 times less return on investment than Citigroup. In addition to that, Xtrackers LevDAX is 1.14 times more volatile than Citigroup. It trades about 0.16 of its total potential returns per unit of risk. Citigroup is currently generating about 0.33 per unit of volatility. If you would invest  5,944  in Citigroup on April 25, 2025 and sell it today you would earn a total of  2,141  from holding Citigroup or generate 36.02% return on investment over 90 days.

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

Xtrackers LevDAX  vs.  Citigroup

Xtrackers LevDAX

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

Citigroup

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers LevDAX and Citigroup

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

The idea behind Xtrackers LevDAX and Citigroup 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.