Correlation Between Citigroup and VanEck Defense

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

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

Diversification Opportunities for Citigroup and VanEck Defense

0.79

Correlation Coefficient

Citigroup  VanEck Defense

Poor diversification

The 3 months correlation between Citigroup and VanEck is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and VanEck Defense ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Defense ETF 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 VanEck Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Defense ETF has no effect on the direction of Citigroup i.e., Citigroup and VanEck Defense go up and down completely randomly.

Pair Corralation between Citigroup and VanEck Defense

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.26 times more return on investment than VanEck Defense. However, Citigroup is 1.26 times more volatile than VanEck Defense ETF. It trades about 0.14 of its potential returns per unit of risk. VanEck Defense ETF is currently generating about 0.14 per unit of risk. If you would invest  6,117  in Citigroup on September 26, 2024 and sell it today you would earn a total of  983.00  from holding Citigroup or generate 16.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  VanEck Defense ETF

Citigroup

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

VanEck Defense ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and VanEck Defense

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

The idea behind Citigroup and VanEck Defense ETF 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.