Correlation Between Citigroup and Vu Dang

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

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

Diversification Opportunities for Citigroup and Vu Dang

0.55

Correlation Coefficient

Citigroup  Vu Dang

Very weak diversification

The 3 months correlation between Citigroup and SVD is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Vu Dang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vu Dang Investment 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 Vu Dang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vu Dang Investment has no effect on the direction of Citigroup i.e., Citigroup and Vu Dang go up and down completely randomly.

Pair Corralation between Citigroup and Vu Dang

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.02 times less return on investment than Vu Dang. But when comparing it to its historical volatility, Citigroup is 1.5 times less risky than Vu Dang. It trades about 0.18 of its potential returns per unit of risk. Vu Dang Investment is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  284,000  in Vu Dang Investment on September 14, 2024 and sell it today you would earn a total of  61,000  from holding Vu Dang Investment or generate 21.48% return on investment over 90 days.

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

Citigroup  vs.  Vu Dang Investment

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vu Dang Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vu Dang Investment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Vu Dang displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Vu Dang

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

The idea behind Citigroup and Vu Dang Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.